a) COMPANY P/E NET INCOME # OF SHARES A 15 $200,000 50,000 B 60 $ 40,000 100,000 Estimate the market price of each common share using the P/E ratio method

b) Expedia is planning to expand its operations into Asia by purchasing Big Bus Tours (BBT). BBT operates charter buses throughout China and Southeast Asia. Estimate the selling price of BBT using the Free Cash Flow Method. Expedia assumes the risk of BBT to be relatively high and therefore assigns a Cost of Capital is 10% for this investment. Expedia estimates that after 20 years, they can sell the remaining assets in BBT for $15,000,000. (6 marks) Free Cash Flow per Year Year 1 - 8 $ 5,000,000 Year 9 - 20 7,000,000 Terminal Value (yr 20) 15,000,000