You are required to do equity valuation of a new-age business entity, SLEFLEARN, an online training institute. It is said to be an interesting business to invest for future growth. It is January 1, 2021 and the stock is trading at Rs. 25 per share. They follow January to December as their financial year. You obtain the financial statements information of SELFLEARN to compute the value of the business: Book value is Rs. 12 per share as of December 31, 2020 Earnings for 2020 were Rs. 4.0 per share Earnings are expected to grow at 20% for the next four years Dividend payout is 40%. Cost of equity capital is 15%.

a. You are required to determine the value of share using the residual income method, so that whether you should buy SELFLEARN share as of January 1, 2021 (round your answer to the nearest cent).

b. Comment on the Strengths and limitations of this model for investment decisions.