Question 3 (30 marks)

Here are some accounting numbers and market values (in millions) for AAA Company, BBB Company, CCC Company, and DDD Company for 2020. These four companies are considered to be comparable for EEE Company

Earnings Book Value Market Value

AAA Company $10,000 $40,000 $120,000

BBB Company 200 1,200 7,000

CCC Company 20,000 80,000 200,000

DDD Company 500 2,000 15,000

EEE Company reported the following number for fiscal year 2020:

Earnings: $ 3,000 million

Book value: $ 4,000 million

Outstanding shares: 1,000 million

a/ Apply PE method to estimate the intrinsic value of one share of EEE Company (15 marks).

b/ Apply PB method to estimate the intrinsic value of one share of EEE Company (15 marks).