In contrast to various discounted cash-flow techniques that attempt to estimate a specific value for

In contrast to various discounted cash-flow techniques that attempt to estimate a specific value for

Part B (5 marks)

In contrast to various discounted cash-flow techniques that attempt to estimate a specific value for a stock based on its estimated growth rates and its
discount rate, the relative valuation techniques implicitly contend that it is possible to determine the value of an economic entity (i.e., the market, an
industry, or a company) by comparing it to similar entities on the basis of several relative ratios that compare its stock price to relevant variables that
effect a stock’s value, such as earnings, cash flow, book value and sales.

Consider the following four approaches.

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