1. Based on PEG ratios alone, determine under-valued and over-valued stocks (as commonly used by financial analysts).

2. The relation between PEG and expected g is non-linear. The relation is estimated with the natural log of the expected growth rate:

PEG = -0.2 1.9*ln(expected g) R² = 45%

Using the above regression result, find predicted PEG for each company and discuss the results compared to your answer in (1).

Company - PE Ratio- Expected ge Ln(expected g) PEG Ratio 16.12- 50% -0.301 0.32- B- 21.364 17.50%- -0.7572 1.224 CH 29.31- 20.50%- -0.688- 1.434 De 63.08- 26% -0.5854 2.432