How do you calculate and know if the firm is overvalued or undervalued please ex

Question

How do you calculate and know if the firm is overvalued or undervalued please explain. In other words base on the above number what makes company A overvalued, B undervalued, and C rightly valued.

Assume that you have been asked to evaluate the P/E ratios of five prospective acquisition candidates. You have the following information PE ratio th rate yout ratio 5% 8% 10% 11% 12% 10 1.0 1.25 1.25 0.9 0.8 0.6 0.4 0.45 2.0 If the riskless rate is 7%, the return on the market is 15% and the above statistics will hold through infinity, which of the companies are overvalued and which are undervalued? a. b. Now assume that you are using a regression methodology to estimate the relationship between PE ratios and these variables. Using a cross-sectional sample, you obtain the following equation: PE 2 0.3 x growth rate+5 x payout ratio 1x beta. Using this equation, which of the companies are overvalued and which are undervalued? Please show all work

Explanation / Answer

Use this link to get answer

https://financeaccountsonlinetutoring-overorundervaluationofirm.googledrives/

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.