In the Apple Tree and Experience article, we have discussed several valuation options. In earnings capitalization model
Posted: Tue Jul 05, 2022 11:48 am
In the Apple Tree and Experience article, we have discussedseveral valuation options. In earnings capitalization model anddiscounted cash flow model, the cost of equity is used as adiscount rate to estimate firm's value. PE is one of the indicatorof showing firm's growth opportunity. Also it is used to estimatethe cost of equity, which is the minimum rate of return thatinvestors expect from this firm in the market. 1. If PE is 77, whatis the cost of equity estimated using PE? Is this cost of equityreasonable? Please discuss. 2. What accounting information could beuseful in this valuation process? How could accountingprofessionals provide useful information for the decision-making?3. We discussed the decision-making process of active vs. passiveinvestors. Is this buyer an active investor or passive investor?Why?