Part III: Problems (14 points) 1. Stock pricing. (6 points) a. Carson Company plans to issue 1 million shares of stock. Last year, Carson Company had earnings of $2 million. The P/E ratio for the industry is 15. Estimate the fair per share value for Carson Company's stock. What's the problem with the PE method? Carson Company's stock has a beta of 1.3. What does this beta measure? Calculate the required rate of return on Carson Company's stock, given a 1% risk free rate and a 7% market return. c. The Fed is raising interest rate to fight inflation. How does this affect Carson Company's stock price? Why