ZebraCo is a retailing company. It has 130 million shares outstanding. It has experienced very rapid growth over the last five years and continues to expand its operations. You are a financial analyst and have been asked to value ZebraCos shares.

a. A colleague has suggested that you should use the discounted free cash flow valuation model to value ZebraCos shares. Briefly explain the limitations of this approach.

b.Your colleague suggests that the residual earnings valuation model does not work well for companies that have large assets not included on the balance sheet, such as internally generated brands. Do you agree? Explain your answer.

c.Explain, in your own words, what is meant by the term core earnings and explain how information about a firms core earnings can be used when valuing a companys shares.