Afriend of yours - Sam Andersson - started up a grocery store (Norwegian:

'dagligvareforretning') 18 months ago. The store has become a huge success, with sales

figures far above Sam's expectations. Several investors have approached Sam and shown an

interest in buying the store. Sam might be willing to sell, but he has no idea as to what would

be a correct price for his store. He comes to you for advice and wants you to help him

calculate a selling price.

You are thinking of using Stephen Penman's framework for fundamental valuation in order to value the store. The steps in this framework are:

1. Knowing the business

2. Analysing information.

3. Forecasting payoffs

4. Convert forecasts to a valuation

5. Trading on the valuation

Explain how you can use this framework to value Sam's store. Do you see any problems in

using the framework for this particular case? Are there any other valuation methodologies that could be relevant to apply?

Assume now that Sam' store was 18 years old instead of 18 months old. Would that change

your answers to the questions above?