In 2020, Value Max Ltd. had earnings before interest and taxes (EBIT) of $5,324 million and was subject to an effective tax rate of 45%. Assume that the firm aims to maintain a zero % p.a. of long-term growth rate, which requires a reinvestment rate of 42%. This reinvestment rate is useful for the Free Cash Flow to Firm (FCFF) valuation model. The Weighted Average Cost of Capital (WACC) is 5.62% p.a. There are 800 million outstanding shares. The market capitalisation of Value Max Ltd. is $32.5 billion.

Complete the following sentence:

The stock of Value Max Ltd. is...

a.

underpriced by $40.625 per share.

b.

overpriced by $40.625 per share.

c.

None of the options provided.

d.

overpriced by $2.85 per share.

e.

underpriced by $2.85 per share.