C:

(1) What is the current required return for Inditex stock? (Assume a beta of 1)

(2) What will be the new required return for Inditex stock assuming that they expand into European and Latin American markets as planned? (Assume a beta of 1)

D: If the securities analysts are correct and there is no growth in future dividends, what will be the value per share of the Inditex stock? (Note: Use the new required return on the companys stock here.)

E: (1) If Amancio Ortegas predictions are correct, what will be the value per share of Inditex stock if the firm maintains a constant annual 6% growth rate in future dividends? (Note: Continue to use the new required return here.)

(2) If Amancio Ortegas predictions are correct, what will be the value per share of Inditex stock if the firm maintains a constant annual 8% growth rate in dividends per share over the next 2 years and 6% thereafter? (Note: Continue to use the new required return here.)

F: Compare the current (2021) price of the stock and the stock values found in parts a, d, and e. Discuss why these values may differ. Which valuation method do you believe most clearly represents the true value of the Inditex stock? Explain your reasoning.

/FIN-410%20Assignment%20Spring%202022.pdf 1 / 3 100% + Assignment In the world of trendsetting fashion, instinct and marketing savvy are prerequisites to success. Amancio Ortega had both. During 2021, his international casual-wear company, Inditex, 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. In Manhattan, there was an Inditex shop every five or six blocks, each featuring a different color. Some shops showed the entire line in mauve, and others featured it in canary yellow. Inditex had made it. The company's historical growth was so spectacular that no one could have predicted it. However, securities analysts speculated that Iniditex 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 stockholders also should expect no growth in future dividends. Contrary to the conservative securities analysts, Amancio Ortega felt that the company could maintain a constant annual growth rate in dividends per share of 6% in the future, or possibly 8% for the next 2 years and 6% thereafter. Ortega based his estimates on an established long-term expansion plan into European and Latin American markets. Venturing into these markets was expected to cause the risk of the firm, as measured by the risk premium on its stock, to increase immediately from 8.8% to 10%. Currently, the risk-free rate is 6%. ligi 2 1 3 100% + In preparing the long-term financial plan, Initex's chief financial officer has assigned junior financial analyst, Pablo Isla, to evaluate the firm's current stock price. He has asked Pablo to consider the conservative predictions of the securities analysts and the aggressive predictions of the company founder, Amancio Ortega. Pablo has compiled these 2021 financial data to aid his analysis: 2021 value 6.25 40.00 Data item Earnings per share (EPS) Price per share of common stock Book value of common stock equity Total common shares outstanding Common stock dividend per share 60,000,000 2,500,000 4.00 REQUIRED: P lige /FIN-410%20Assignment%20Spring%202022.pdf 1 / 3 100% + Assignment In the world of trendsetting fashion, instinct and marketing savvy are prerequisites to success. Amancio Ortega had both. During 2021, his international casual-wear company, Inditex, 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. In Manhattan, there was an Inditex shop every five or six blocks, each featuring a different color. Some shops showed the entire line in mauve, and others featured it in canary yellow. Inditex had made it. The company's historical growth was so spectacular that no one could have predicted it. However, securities analysts speculated that Iniditex 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 stockholders also should expect no growth in future dividends. Contrary to the conservative securities analysts, Amancio Ortega felt that the company could maintain a constant annual growth rate in dividends per share of 6% in the future, or possibly 8% for the next 2 years and 6% thereafter. Ortega based his estimates on an established long-term expansion plan into European and Latin American markets. Venturing into these markets was expected to cause the risk of the firm, as measured by the risk premium on its stock, to increase immediately from 8.8% to 10%. Currently, the risk-free rate is 6%. ligi 2 1 3 100% + In preparing the long-term financial plan, Initex's chief financial officer has assigned junior financial analyst, Pablo Isla, to evaluate the firm's current stock price. He has asked Pablo to consider the conservative predictions of the securities analysts and the aggressive predictions of the company founder, Amancio Ortega. Pablo has compiled these 2021 financial data to aid his analysis: 2021 value 6.25 40.00 Data item Earnings per share (EPS) Price per share of common stock Book value of common stock equity Total common shares outstanding Common stock dividend per share 60,000,000 2,500,000 4.00 REQUIRED: P lige