Sample Essay

The equity method applied in the ownership of the 20 warehouses in Mexico is not appropriate as it proves that the growth in the shareholders capital is too high and unachievable. This high growth rate ensures that there is little room for liabilities and this cannot be true for a growing company which should take risks to expand. It will also ensure that the expenses are too little and thus the net working capital is too high and unrealistic.

Considering the projections of the management, effect of competition and historical performance of the firm, it is correct to argue that Torres forecast is aggressive. This is because considering the growth rates she has projected, it is quite unrealistic. She has high hopes which are unachievable. He theory of reversion proves that the projection of Torres are very high and thus discounting them to now, they are very wrong comparing the growth rates evidenced now.

Although the per share price is now at $35, I cannot advice Torres to sell her shares at that price because despite the current competition the firm is facing from its competitors, there is promising growth. This growth may not reach the rate she has projected but it is enough to raise the share value to a substantial amount. It is therefore advisable that Torres holds for some time.

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