Using each of these methods, what is your estimate of the growth rate for American Airlines?

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1. There are three ways to estimate growth
rates for earnings, revenues, and dividends. These include (1) the growth
rate of the firm’s past (operating) earnings, (2) obtain the information from
analysts, and (3) estimate the rates from the firm’s fundamentals. Using
each of these methods, what is your estimate of the growth rate for American
Airlines?

2.Analysts normally must calculate a
terminal value of a firm when preparing a discounted cash flow valuation.
There are three ways to prepare this estimate, which include (1) assuming a
liquidation value of the firm’s assets in the terminal year, (2) applying a
multiple to earnings, revenues or book value, and (3) assuming the free cash
flows will grow at a constant rate forever (a stable growth rate). Using
each of these methods, what is your estimate of the terminal value for American
Airlines?

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