Financial Ratio analysis

    Suppose that we observe the following information for a company that we are trying to value (ERIC) and two matching companies:

    Ratio    ERIC          MATCH1                MATCH2
    P/E            10                      20                                15

    Please answer each question:

    a.  Based on this information, is ERIC undervalued or overvalued? Justify your answers.

    b.  If ERIC has EPS of $2.0, what would an appropriate target price be for ERIC using relative valuation?

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