ANSWER WITH EXPLANANTION AND SOLUTION PLEASE

You are considering two stocks. Both pay a dividend of $$1,$ but the beta coefficient of $A$ is $2\mathrm{.}5$ while

the beta coefficient of B is $0\mathrm{.}75.$ The market risk premium is $5\mathrm{.}5\%,$ while the expected market rate

of return is $15\%.$

a$.$ What is the required return for each stock?

b$.$ If $A$ is selling for $$10$ a share, is it a good buy if you expect earnings and dividends to grow at $5\%?$

c$.$ What is the expected rate of return?

Your manager requested to determine the price at which the company should sell its share in the

planed IPO. Based on what you have learned while doing your FINC $321$ at AUBH, you have decided

to use different valuation methods learned. One of which is comparable. Your forecasted EPS$1=$

$$4\mathrm{.}50,$ Sales per share in the coming year $=$$$10,$ and forecasted book value per share $=$$$3\mathrm{.}50.$ The

number of shares to be issued is $100$ million. In addition you have collected some indicators of

comparable companies to the your company $($shown in the table below$).$ What should be the price at

which price per share your company should sell the stocks.

Ratios for two firms are given below along with their industry averages. Industry A is a high

growth industry while industry B is a slower growth consumer durables industry.

Based solely on the table above, which firm appears to be undervalued? Explain