As a telecommunications industry analyst at a brokerage firm, you are valuing Verizon Communications, Inc. (NYSE: VZ), the second largest U.S. telecommunications service provider. The valuation metric that you have selected is the trailing P/E. You are evaluating the P/E using the median trailing P/E of peer-group companies as the benchmark value. According to GICS, VZ is in the telecommunications services sector and, within it, the integrated telecommunication services subindustry. An Exhibit given below presents the relevant data. (Note that although BCE Inc. is a Canadian company, it is classified in this peer group.

Company	Trailing P/E	Leading P/E
Equinix (EQUIX)	702.6	49.1
Qwest Communications International (Q)	2.7	8.6
AT&T (T)	17.4	10.2
BCE Inc. (BCE)	7.7	14.8
Citizens Communications Co. (CZN)	19.2	16
Windstream Corp. (WIN)	6.5	11.7
Cincinnati Bell (CBB)	19.6	9.2
Verizon Communications (VZ)	18.3	12.2
Centrurytel (CTL)	8.3	9.4
Mean	89.2	15.7
Median	17.4	11.7

1. Given the stated definition of the benchmark, what is the most appropriate benchmark value of the P/E for VZ.

1. The median trailing P/E for the group 17.4 is the most appropriate benchmark, since it mitigates the effect of outliers on the valuation calculation.
2. The mean trailing for the group 89.2 is the most appropriate benchmark, since it mitigates the effect of outliers on the valuation calculation.
3. Both the mean trailing P/E and median trailing P/E are appropriate.
4. None

2. If the consensus one-year ahead EPS forecast is $3.42, then the intrinsic value of T is equal to________.

1. $59.51
2. $305.10
3. $40.01
4. $53.69

3. Which of the above companies are identified as possibly relatively undervalued compared with the peer group as a whole?

1. EQUIX, CZN, VZ and T
2. EQUIX, CZN, CBB
3. WIN, VZ and CBB
4. Q, WIN, BCE and CTL