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Essay / Jetblue Case Study Solution - 732
Using the multiple P/E method is suitable for valuing company stocks, but this method does not provide the same quality as the DCF model , when we differentiate from other companies. Although it doesn't give the exact results when we have more companies in the same field. The dividend growth model is not relevant for this company because the company has not revealed its dividend on the stock market. Also, the company wishes to have its own funds to finance its growth. It is therefore difficult to use this method because we do not have any information on the dividend. Since the DCF model is more appropriate to use, it also gives us the best picture of relative companies in terms of intrinsic stock value. Additionally, we calculated the WACC to be 9.98%, after which we used DCF analysis. In our analysis, we assumed the share would be 20.5 per share. This tells us that the management price was overvalued for the IPO and the price was 25-26. This will put management under pressure because the price was higher than what we had estimated, this would result in sales of the company in the future and would put investors in an embarrassing situation. So, they should recommend the price range of 20 to