Reference no: EM13911702
Consider the following excerpt from a prudential report on Wal-Mart, dated May 13, 2003. The report states:
We are maintaining our Hold rating on Wal-Mart as we believe the stockâ??s current valuation of 28 times our 2003 EPS estimate of $2.01 adequately reflects the company 13% 5- year EPS growth rate...Wal-Mart is currently trading at 28.2 times our2033 estimate of $2.01,a 57% premium to S&P 500. This is not far from the retailerâ??s five-year average high premium of 59%. The stock is also close to its 52-week high of $59.30, achieved in May 2002.
It is difficult for us to envision investors paying an even larger premium, particularly for 13% projected growth. We believe the stock will continue to hover around a 55% premium to market multiple or 27.9 times. Using this valuation and our 2003 EPS estimate of $2.01 yields 12-month price targets of $56, up from $55.
Discuss the merits of the valuation technique mentioned in this expert, with reference to the contents of the chapter. Base your discussion on the following questions.
- Is using a heuristic necessarily wrong in respect to valuation?
- Do you think eBay is an anomalous case, and are there situations where the use of heuristics makes sense?
- Is valuation part science and part art?
- What advice would you give financial managers when it comes to valuing their firms?
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How can these rules be manipulated to make an investment
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: Your firm needs a machine which costs $270,000, and requires $42,000 in maintenance for each year of its 7 year life. After 3 years, this machine will be replaced. The machine falls into the MACRS 7-year class life category. Assume a tax rate of 40% ..
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Find the minimum percentage of all possible daily demand
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What will be the effect on cash flows of this sale
: Suppose you sell a fixed asset for $93,000 when it's book value is $116,000. If your company's marginal tax rate is 28%, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)?
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Is using heuristic necessarily wrong in respect to valuation
: Is valuation part science and part art and What advice would you give financial managers when it comes to valuing their firms?
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The company average total assets
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What distribution describes the random variable x explain
: Let x equal the number of the eight randomly selected patients whose symptoms are significantly relieved. What distribution describes the random variable x? Explain.
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How many concrete trucks would it take to deliver concrete
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Estimated age of the fossil
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