4. Valuation Project: Use the attached data. For each firm, use three years of data to calculate P/E ratio. Answer the following question:

a. Use the median test to evaluate the overvaluation/undervaluation of each firm. Is overvaluation/undervaluation due to high ROE or not?

b. Use the regression approach to evaluate the overvaluation/undervaluation of each firm. In other words, regress P/E ratio on ROE and obtain the predicted P/E ratio. Do your conclusions change?

c. We are looking for stocks that trade at low P/E ratios, while generating high returns on equity (ROE), with low risk (proxied by standard deviation of past returns). Use the regression approach to find out the firms that satisfy the criteria.

conm	fyear	Price	EPS	ROE	Return std.
BK TECHNOLOGIES	2014	4.8	0.12	0.048837	0.2404288
BK TECHNOLOGIES	2015	3.94	0.08	0.0298966	0.7117521
BK TECHNOLOGIES	2016	4.75	0.19	0.0751663	0.4956409
UBIQUITI NETWORKS INC	2014	45.19	1.97	0.5277542	2.273072
UBIQUITI NETWORKS INC	2015	31.915	1.45	0.3071462	1.62648
UBIQUITI NETWORKS INC	2016	38.66	2.49	0.4850764	1.048476
APPLE INC	2014	100.75	6.45	0.3542005	0.4617628
APPLE INC	2015	110.3	9.22	0.4473545	0.4360688
APPLE INC	2016	113.05	8.31	0.3562367	0.2782393
TELEFONAKTIEBOLAGET LM ERICS	2014	12.1	0.45	0.080163	0.0584378
TELEFONAKTIEBOLAGET LM ERICS	2015	9.61	0.49	0.0924689	0.1598127
TELEFONAKTIEBOLAGET LM ERICS	2016	5.83	0.06	0.0122732	0.4575122
CLEARONE INC	2014	9.7676	0.58	0.0736161	0.7695413
CLEARONE INC	2015	12.93	0.71	0.0820647	0.53249
CLEARONE INC	2016	11.4	0.26	0.0315562	0.4917352
ARRIS INTERNATIONAL PLC	2014	30.19	2.21	0.1935288	0.1322574
ARRIS INTERNATIONAL PLC	2015	30.57	0.62	0.0513854	0.201504
ARRIS INTERNATIONAL PLC	2016	30.13	0.09	0.0056761	0.204078
DSP GROUP INC	2014	10.87	0.16	0.0245664	0.3265597
DSP GROUP INC	2015	9.44	0.07	0.0108988	0.4217461
DSP GROUP INC	2016	13.05	0.21	0.0330684	0.3813058
VIASAT INC	2014	59.61	0.84	0.0388636	0.5182681
VIASAT INC	2015	73.48	0.44	0.0192551	0.3252378
VIASAT INC	2016	63.82	0.45	0.0137016	0.0913321
ECHOSTAR CORP	2014	52.5	1.78	0.0432683	0.4183797
ECHOSTAR CORP	2015	39.11	1.75	0.0414986	0.412558
ECHOSTAR CORP	2016	51.39	1.92	0.0458998	0.4708227