Question

1.) Assume a major investment service has just given Oasis Electronics its highest investment​ rating, along with a strong buy recommendation. As a​ result, you decide to take a look for yourself and to place a value on the​ company's stock.​ Here's what you​ find: This​ year, Oasis paid its stockholders an annual dividend of $3.68 a​ share, but because of its high rate of growth in​ earnings, its dividends are expected to grow at the rate of 12% a year for the next 4 years and then to level out at 9 % a year. So​ far, you've learned that the stock has a beta of 1.63, the​ risk-free rate of return is 6​%, and the expected return on the market is 11​%. Using the CAPM to find the required rate of​ return, put a value on this stock.

2.) You're thinking about buying some stock in Affiliated Computer Corporation and want to use the​ P/E approach to value the shares.​ You've estimated that next​ year's earnings should come in at about ​$3.59 a share. In​ addition, although the stock normally trades at a relative​ P/E of 1.13 times the​ market, you believe that the relative​ P/E will rise to 1.28​, whereas the market​ P/E should be around 17.8 times earnings. Given this​ information, what is the maximum price you should be willing to pay for this​ stock? If you buy this stock today at $75.96,what rate of return will you earn over the next 12 months if the price of the stock rises to $92.89 by the end of the​ year? (Assume that the stock​ doesn't pay any​ dividends.)

3.) World Wide Web Wares​ (4W, for​ short) is an online retailer of small kitchen appliances and utensils. The firm has been around for a few years and has created a nice market niche for itself. In​ fact, it actually turned a profit last​ year, albeit a fairly small one. After doing some basic research on the​ company, you've decided to take a closer look. You plan to use the​ price-to-sales ratio to value the​ stock, and you have collected​ P/S multiples on the following Internet retailer​ stocks:

Company	​P/S Multiples
Amazing.com	4.1
ReallyCooking.com	3.5
Fixtures​ & Appliances Online	3.5

Find the average​ P/S ratio for these three firms. Given that 4W is expected to generate $33 million in sales next year and will have 12 million shares of stock​ outstanding, use the average​ P/S ratio you computed above to put a value on​ 4W's stock.

PLEASE help, I have no idea what I'm doing

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE