Integrative Case 3 Encore International Ta the woeld of trendwetting fashion, instinct and marketing sewy are peerequisites company, Encore, rocketed to $300 million in sales after 10 years in business. His fashion line covered the young woman from head to toe with hats, sweaters dresses, blouses, skirts, parts, weatshirts, socks, and shoes. In Manhattan, there was an Encore shop every five or six blocks, each featuring a different color. Some shope showed the entire line in mauve, and others featured it in canary yellow Encore had made it. The company's historical growth was so spectacular that no one could have predicted it. However, securities analyses speculated that Encore could not keep up the pace. They warned that competition is fierce in the fashion industry and that the firm might encountet little or no growth in the future. They estimated that stockholders also should expect no growth in future dividende Contrary to the conservative securities analysts, Jordan Flis believed that the company could maintain a constant annual growth rate in dividends per share of 6% in the future, or posibly 8% for the next 2 years and 6% thereafter. Ellis based his estimates on an established long-term expansion plan into European and Latin American markets. Venturing into these market was expected to cause the risk of the firm, as measured by the risk premium on its stock, to increase immediately from 1.8% to 10%. Currently, the risk free rate is 6% In preparing the long term financial plan, Encore' chief financial officer has signed a junior financial analyst, Marc Scott, to evaluate the firm's current stock price. He has asked Mure to consider the conservative predictions of the securities analyses and the agresive predictions of the company founder, Jordan Ellis Marcas compiled the following 2015 financial data to aid his analysis. [ HH4 HH v Tap 5625 Peshwe ock Bok valamity S000,000 Telmand Come dividend per share 54.00 TO DO What is the firm's current book value pet share? b. What is the firm's current Period 6. (t) What is the current required return for Encore stock? (2) What will be the new required return for Encore stock asuming that the firm expands into European and Latin American markets as planned? d. If the securities analysts are correct and there is no growth in future dividends, what will be the value per share of the Encore stock? (Note: Use the new required return on the company's stock here! 356 Integrative Case 3 Encore International Ta the woeld of trendwetting fashion, instinct and marketing sewy are peerequisites company, Encore, rocketed to $300 million in sales after 10 years in business. His fashion line covered the young woman from head to toe with hats, sweaters dresses, blouses, skirts, parts, weatshirts, socks, and shoes. In Manhattan, there was an Encore shop every five or six blocks, each featuring a different color. Some shope showed the entire line in mauve, and others featured it in canary yellow Encore had made it. The company's historical growth was so spectacular that no one could have predicted it. However, securities analyses speculated that Encore could not keep up the pace. They warned that competition is fierce in the fashion industry and that the firm might encountet little or no growth in the future. They estimated that stockholders also should expect no growth in future dividende Contrary to the conservative securities analysts, Jordan Flis believed that the company could maintain a constant annual growth rate in dividends per share of 6% in the future, or posibly 8% for the next 2 years and 6% thereafter. Ellis based his estimates on an established long-term expansion plan into European and Latin American markets. Venturing into these market was expected to cause the risk of the firm, as measured by the risk premium on its stock, to increase immediately from 1.8% to 10%. Currently, the risk free rate is 6% In preparing the long term financial plan, Encore' chief financial officer has signed a junior financial analyst, Marc Scott, to evaluate the firm's current stock price. He has asked Mure to consider the conservative predictions of the securities analyses and the agresive predictions of the company founder, Jordan Ellis Marcas compiled the following 2015 financial data to aid his analysis. [ HH4 HH v Tap 5625 Peshwe ock Bok valamity S000,000 Telmand Come dividend per share 54.00 TO DO What is the firm's current book value pet share? b. What is the firm's current Period 6. (t) What is the current required return for Encore stock? (2) What will be the new required return for Encore stock asuming that the firm expands into European and Latin American markets as planned? d. If the securities analysts are correct and there is no growth in future dividends, what will be the value per share of the Encore stock? (Note: Use the new required return on the company's stock here! 356
