5.) a) Describe all of the stages of analysis, starting with the qualitative stage and culminating in the inputs for our valuation models. Explain carefully how the stages of analysis fit together.

(15 marks)

b) Condensed financial statements for Prudenter Agas, a high tech start-up, are shown below in ARS ($).

Condensed SOPL, year ended 31 December 2020	$ million
Operating revenue	814
Operating expense	376
Operating income (OI)	438
Financial expense	30
Financial income	18
Net financial expense	12
Comprehensive income	426

Condensed SOFP, as at 31 December 2020	$ million
Operating assets	1502
Operating liabilities	626
Net operating assets (NOA)	876
Financial obligations	751
Financial assets	188
Net financial obligations (NFO)	563
Common shareholders' equity (CSE)	313

You are given the following predicted annual growth rates for 2021 to 2025:

Net operating assets	20%
Operating revenue	8%
Operating expense	5%
Financial expense	3%
Financial income	0%

From 2026 onwards, the expected annual growth rate of abnormal operating income (AOI) is 1% in perpetuity. The weighted average cost of capital is 6%. Assume for simplicity that there are no taxes.

(i) Based on the above assumptions, determine the value of Prudenter Agass equity at the end of 2020.

(8 marks)

(ii) An investor believes that Prudenter Agas should be trading at 40 times book value. Comment.

(2