MoviePlex Ltd is a company that owns and runs cinema complexes across the country. The Covid-19 crisis has led to them being shut down for a period of three months. The new social distancing rules suggest that when they re-open they are going to be able to admit a significantly reduced number of people to each show. The share price has fallen by 75% from R10/share at the end of January 2020 to R2.50/share at the end of June 2020.

a. Explain why it might be rational for the share price of a company to go down given the effects of the current ongoing Covid-19 crisis. In your answer explain how a share is valued using the Dividend Discount model and how the crisis might affect the inputs used in this calculation. No calculations are required for this answer.