In the most recent financial year, XYZ Co. reported sales of $1150 million, earnings before interest and tax of $250 million, interest payments of $35 million. It also paid out 80% of its earnings as dividends and expected to grow at 4%. It is currently traded at a price 3.5 times of the sales per share. XYZ Co. has a tax rate of 30% and a cost of equity of 12%.

1. Estimate the fundamental P/S Ratio for XYZ Co. (3 marks)
2. What is the implied net profit margin in the firm's currently traded P/S ratio. (2 marks)
3. Given XYZ Co.s current P/S of 3.5, the median P/S of 5 from XYZs comparable firms, and the fundamental P/S computed from part a), explain whether the stock is over-valued or under-valued? (3 marks)