solution

Misperceptions regarding beta are all too common in textbooks and on the internet. Which of the 8 following statements are false? (1) Beta is equal to systematic risk. (2) A stock with a beta of two, has twice as much systematic risk as the broad stock-market. (3) Beta is the link between systematic risk and expected return. (4) (1) and (2) (5) (1) and (3) (6) (2) and (3) (7) (1), (2) and (3) (8) None of the above. Enter a value from 1 to 8 – based upon your best answer.

B) You seek to determine the Comps-price of See-It Industries common stock. The stock currently sells for $21.1 per share, and is expected to have earnings per share next year of $2.84 per share. Based on risk, the fair discount rate of See-It’s common stock is estimated to be 11.3% per year.

Within the same industry there are a host of competing firms. Of those, three of them appear to have operations that are closely aligned with See-It Industries. Those firms, (i) Vision, (ii) XOut and (iii) Zeekum, currently trade at stock prices of $39, $52, and $42 per share, respectively. Next year the three firms are expected to have earnings per share of $2.82, $3.15, and $1.87 respectively.

Based on risk, the fair discount rate of Vision, XOut and Zeekum is estimated to be 9.2%, 11.5%, and 9.9% per year.

Determine the Comps-price of See-It stock based on the forward-looking P/E ratio.

Provide an answer with at least 4 digits of precision.