Bachelor of Business
(Incorporating Graduate Diploma and Graduate Certificate in Business)

Managerial Finance (ACCT 706)
Semester Two, 2016

Assignment # 2
Due Date:

Week 8, 03/05/16, 12.00 noon

Weighting:

25% of the final grade

Type:

Individual Assignment

Length:

Approximately 2,000 – 3,000 words excluding appendices

Submission: Students are expected to submit a hard copy of the assignment along with
Arion generated barcoded assignment cover sheet in the drop box located in
WF building (ground floor). All assignments should be submitted via turnitin and a turnitin report should accompany the assignment (Please note: Turnitin submission should precede physical submission and only the hardcopy will be marked). Penalty for late submissions: 10% of the mark obtained for each 24-hour delay including weekends.

Page 1 of 6

QUESTION 1: VALUATION OF SHARES

(35 MARKS)

A. In the world of trendsetting fashion, instinct and marketing savvy are prerequisites to success. Jordan Ellis had both. During 2015, his international casual-wear 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, pants, sweatshirts, socks, and shoes. The Encore shops are now a standard feature in every town in
New Zealand.
Encore had made it. The company’s historical growth was so spectacular that no one could have predicted it. However, securities analysts speculated that Encore could not keep up the pace. They warned that competition is fierce in the fashion industry and that the firm might encounter little or no growth in the future. They estimated that shareholders also should expect no growth in future dividends.
Contrary to the conservative securities analysts, Jordan Ellis felt that the company could