Your company is considering purchasing a private company, Bargains Galore Pty Ltd. The company made a profit of $3.1 million last year (including depreciation and amortisation expenses of $0.2 million) and currently has $4 million debt outstanding. You have identified a publicly traded company, Discount Warehouse Ltd, that is very similar to the one you are valuing. The most recent income statement for Discount Warehouse Ltd is as follows: Revenue $ 62.0 Cost of sales $ 40.0 Gross profit $ 22.0 Selling, general, & administrative expenses $ 3.0 Operating profit (EBIT) $ 19.0 Interest expense $ 1.0 Earnings before tax $ 18.0 Tax $ 5.4 Profit $ 12.6 All dollar values are in millions. Discount Warehouse Ltd is currently trading at $8.60 per share, has 1 million shares and $5 million debt outstanding. Depreciation and amortisation expenses were $1.1 million. a) Using the P/E multiple, what is the value of Bargains Galore's shares? Do not round until you get your final answer. Express your answer in whole dollars, without the dollar sign. For example, if your answer is 1,234,567.89, type 1234568 (1 Mark) Answer: a) In reality, is it likely that the share valuation for Bargains Galore based on this calculation would be understated or overstated? (1 Mark)