You are analyzing the pricebook value ratios for firms in the trucking industry, relative to returns on

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You are analyzing the price–book value ratios for firms in the trucking industry, relative to returns on equity and required rates of return. The data on the companies is as follows:

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The Treasury bond rate is 7%, and the market risk premium is 5.5%.

a. Compute the average PBV ratio, return on equity, and beta for the industry.

b. Based on these averages, are stocks in the industry under- or overvalued relative to book values?

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