The following questions all relate to the valuation of the Online Shopping Guru Co. a. Online Shopping Guru Co. has a dividend payout policy of 50% and 100 million shares outstanding. Online Shopping Guru Co. book value per share stood at $10. It has just now paid a dividend of $2.83 per share (D0); the dividends are expected to grow at a constant rate of 6% per year forever. If the required rate of return on the stock is 16%, what is the current value of the stock? (5 marks)

b. Online Shopping Tsar wants to acquire 30% of Online Shopping Guru Co. to expand its market coverage. They find the latest revenue numbers released by Online Shopping Guru Co. attractive booking $2,830 million in the last financial year. The in-house analyst team at Online Shopping Tsar suggested that since this is a minority valuation, they could use multiples valuation for the exercise and selected the peer group and respective trading data below. Latest Data On-Line Star Market On-Line Moon Market On-Line BlueSky Market P/E 5 7 12 P/B 2 2.5 3.5 EV/EBITDA 6 8 5 i. Is the choice of method appropriate for the minority valuation exercise? Yes or No? Justify your answer. (3 marks)

ii. Using the trading data in the table, calculate the value of Online Shopping Guru using P/E, P/B and EV/EBITDA multiples. Be sure to show the value of equity in each case, undertaking any necessary work outs. Show your calculations. (5 marks)

c. Using the following information calculate the value of On-Line Shopping Guru using discounted cash flow analysis. EBITDA Margin = 40%, Depreciation equal to 10% of revenues, change in net working capital = -$500 million/annum, Capex = 5% of revenues. Rfr = 2%, B=2 and market risk premium of 5%. Cost of Debt = 3%. Perpetual growth rate= 1%. Debt / Equity = 1:1 Excess Cash = 0. Assume all on-line shopping platforms in the market are tax exempt as the government is trying to encourage the move to a digital economy on the back of dealing with COVID-19 consequences. Calculate the discounted cash flow valuation for On-Line Shopping Guru. (10 marks)

d. List from low to high the value of equity and each method used to calculate this value. Explain your findings.