Ulysses Inc. is a retail firm that reported $1.5B in after-tax operating income on $15B in revenues this year. The firm also had a capital turnover ratio (Sales/Capital) of 1.5, and a cost of capital of 10%.

a. If you expect operating income to grow 5% a year in perpetuity, estimate the enterprise value-to-sales (EV/Sales) ratio for the firm.

b. What if operating income will grow 10% a year for the next five years, and then grow 5% thereafter? (Note: For an n-period growing annuity, if R = g, then PV is simply n*PMT0.)