
Of course, whether AOL will be able to achieve such stunning levels of earn-
ings growth is a matter for conjecture. One thing is for certain, however. Investors
in AOL are counting on truly unprecedented success in terms of AOL’s future
earnings growth.
VII. AOL RISK ASSESSMENT
Another straightforward way of valuing AOL is to look at the company’s
projected EPS growth and attempt to discount such earnings at an appropriate
risk-adjusted discount rate (Hirschey, 2001).
For argument’s sake, let us assume that AOL is more risky than the typi-
cal stock. The Value Line Investment Survey projects a β = 1.75 for AOL,
meaning that the company has 175% of the ...