(a) Relative approach to valuation is more receptive to many audiences compared to the discounted cash flow approach. Do you agree? Provide justifications for your answer.

(b) Assume that you have been given an assignment by Nairobi Enterprises to estimate the value per share of its common stock using the multiples approach. Nairobi Enterprises is a private company engaged in manufacturing activities. You have been provided with the P/E- Ratios of three similar listed firms at the exchange.

COMPANY	P/E-RATIO
A	1.5
B	1.8
C	2.5

Extracts from recent financial statements shows that the company had a book value of debt of Sh. 2 million. The nominal value of equity was Sh. 10 million with par value of Sh. 5 per share. State any assumptions in your computations

Required:

Given that the average Earnings per Share for Nairobi Enterprises is Sh. 2.0, estimate the market value of Nairobi Enterprises.

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