Consider a Company's financial statements given below. This company belongs to the retail sector and the current market price is $20 per shares with 50,000 common shares outstanding. All net income is re-invested back into the company. Assume the Company's beta on YEAR 0 is estimated to be 1.75, due to lack of historical data. For the foreseeable future risk-free rate is 2.5%, and market risk premium is 11%. Furthermore, assume the company has a long-term growth rate in comprehensive income and FCF for 2.5% after the fifth year. Net income and comprehensive income will be identical. Expect debt to equity ratio and WACC to be the same after year 5 and beyond.

1)Use at least six financial ratios to assess and discuss profitability (three or more ratios) and risk analysis (three or more ratios) for the company.

2)What is the company's value using the following methods?

a.Residual Income

b.Free Cash Flow (FCFF and FCFE) Assume no change in cash liquidity

c.Valuation Ratios (Market Multiples), use at least three ratios.

d.Analyze and explain which one of the above valuation methods provides a better and more realistic valuation based on the solutions and data in this case.