The Edelman Gem Company, a small jewelry manufacturer, has been successful and has enjoyed a good growth trend. Now Edelman is planning to go public with an issue of common stock, and it faces the problem of setting an appropriate price on the stock. The company and its investment bankers believe that the proper procedure is to select several similar firms with publicly traded common stock and make relevant comparisons. Several jewelry manufacturers are reasonably similar to Edelman, with respect to product mix, asset composition, and debt/equity proportions. Of these companies, Kennedy Jewelers and Strasburg Fashions are most similar. When analyzing the following data, assume that 2014 and 2019 were reasonably "normal" years for all three companies - that is, these years were neither especially good nor especially bad in terms of sales, earnings, and dividends. At the time of the analysis the risk-free rate was 8% and the return on the market was 12%. Kennedy is listed on the AMEX and Strasburg is listed on the NYSE, while Edelman will be traded over the counter. Kennedy EPS 2019 $4.50 Strasburg $7.50 Edelman $1,200,000 2014 $3.00 5.50 816,000 Price per share 2019 36.00 65.00 Dividends 2019 2.25 3.75 600,000 2014 1.50 2.75 420,000 Book value per share,2019 30.00 55.00 9 million Total Assets, 2019 28 million 82 million 20 million Total Debt, 2019 12 million 30 million 11 million Sales, 2019 41 million 140 million a. Find the required returns and betas for Kennedy and Strasburg. 37 million b. How do the growth rates for EPS and DPS compare for these three firms? c. Is there something you might recommend to Edelman to bring their policies in line with Kennedy and Strasburg policies? d. Assuming that Edeman's required return might be higher than either Kennedy or Strasburg, calculate a price for Edleman using the dividend discount model and any adjustment to growth rate in dividends you recommended in (c). e. Calculate the Total Assets to Debt Ratio, P/E, MV/BV, and ROE for Kennedy and Strasburg. What price ranges do you obtain for Edelman using the P/E, Market/Book ratios for Kennedy and Strasburg? f. Please comment on the comparability of Kennedy and Strasburg to Edelman. g. What type of stock split might you propose to bring Edelman's price in line with the others? h. What might you propose for an offer price for Edelman? Please discuss your reasons