Eama wishes to sell his minority shareholding of 3,000 Sh.10 shares in Zebra Crafts limited. Zebra Crafts Limited is a private company with an issued share capital of Sh.1,500,000.

The current shareholders and their shareholdings are as follows:

Shareholder	Shareholding (shares)
Mr. Athmany	73,500
Ms. Boiyon	36,000
Mr. Chewe	24,000
Ms. Daule	13,500
Mr. Eama	3,000

The income statements for the five years to 30 June 2000 are as follows:

Year ended 30 September	1996 Sh. 000	1997 Sh. 000	1998 Sh. 000	1999 Sh. 000	2000 Sh. 000
Sales	47,880	50,400	67,200	101,640	140,400
Cost of sales	(20,805)	(21,900)	(35,040)	(62,460)	(93,720)
Gross profit	27,075	28,500	32,160	39,180	46,680
Administration expenses	(10,260)	(10,800)	(12,000)	(14,400)	(16,800)
Distribution costs	(15,330)	(16,140)	(18,000)	(21,600)	(25,200)
Operating profit	1,485	1,560	2,160	3,180	4,680
Taxation	(456)	(480)	(720)	(1,080)	(1,630)
Profit after tax	1,029	1,080	1,440	2,100	3,050
Ordinary dividend	(250)	(270)	(288)	(300)	(315)
Retained profit	779	810	1,152	1,800	2,735

The gross dividend yield on quoted companies operating in the same business sector is 12%. You are advised that this yield should be increased to 18% to allow for lack of marketability. The rate of corporation tax should be taken to be 30% through the period being considered.

Required:

(a) Discuss the relevance of dividends in the valuation of Mr. Eamas shareholding. Illustrate your answer from the data given. (5 marks)

(b) Explain the factors you would take into account when estimating the future dividends and when estimating the investors required yield. (5 marks)

(c) Explain how your approach when valuing a minority interest could be influenced by the size of the shareholding, or the fact that the owner is a party related to other significant shareholders.