7. A P/E ratio of 12 means a. Earnings per share is 12 times higher than price of the stock per share b. The stock is undervalued c. Investors are willing to pay $12 for every one of dollar of earnings d. The stock is overvalued 8. ABC stock is selling for $26 per share. Last dividend paid was St per share and dividends are expected to grow at a constant annual rate of 3% forever. Which of the following statements is correct? a. Dividend yield is 3.5% and total expected rate of return is 6.5% b. Dividend yield is 3.5% and total expected rate of return is 6% c. Dividend yield is 3.96% and total expected rate of return is 6.96% d. Dividend yield is 3.96% and total expected rate of return is 6.25% 9. ABC company's last earnings per share was $1.5 and it is expected that earnings will grow 4% next year. PIE ratio for ABC is expected to be IS. The stock is currently selling for $21. Which of the following statements is correct? a. ABC stock is overvalued by $2.4 and should be sold. b. ABC stock is overvalued by $3.4 and should be sold. c. ABC stock is undervalued by $2.4 and should be bought. d. ABC stock is undervalued by $3.4 and should be bought