After careful financial statement analysis, we obtain these predications for Colin Technology:

Year	Net Income	Beginning Book Value
1	$1,034	$5,308
2	$1,130	$5,292
3	$1,218	$5,834
4	$1,256	$6,338
5	$1,278	$6,728
6	$1,404	$7,266
7	$1,546	$7,856

Colin Technlogy's cost of equity capital is estimated at 13%.

Check

(a) $7,205

(d) $8,644

Required:

a. Abnormal earnings are expected to be $0 per year after Year 7. Use the accounting-based equity valuation model to estimate Colin's value at the beginning of Year 1.

b. Determine Colin's PB ratio using the results in (a). Colin's actual market-based PB ratio is 1.95. What do you conclude from this PB comparison?

c. Determine Colin's PE ratio using the results in (a). Colin's actual market-based PE ratio is 1.0. What do you conclude from this PE comparison?

d. If we expect Colin's sales and porift margin to remain unchanged after Year 7 with a stable book value of $8,506, use the accounting-based equity valution model to estimate Colin's value at the beginning of Year 1.