You are valuing the equity ofOrm Import Emporium Ltdusing the FCFE approach and have estimated that the FCFE over the next five years will be $6.05 million, $6.76 million, $7.36 million, $7.85million and $8.15 million. After this you expect the cash flows to increase at a rate of 2 percent per year for the indefinite future. You estimate that the cost of equity to be 12 percent. The weighted average cost of capital (WACC) forOrm Import Emporiumis 10%.

Required

1. a)What is the value of equity inOrm Import Emporium? Show all supporting calculations.
2. b)What are three income approaches used to value a business? Describe the process used by each valuation method, highlighting how they differ.