1. Jeremiah Claxton, CFA, is a junior portfolio manager for a large university

endowment fund. Claxtons supervisor, Joanne LeMonte, has asked him to

compare the valuation of Home Decor, Inc. and Lesters Companies, Inc. and

make a recommendation for an addition to the funds retail portfolio.

LeMonte has specifically asked Claxton to consider the price-to-cash flow

valuation metric when making his recommendation. Claxton has gathered

the following information.

Claxton has also determined that the CAPM betas of the two firms are not significantly different at the 1% level. Based on the information in the table, Are those two companies overvalued or undervalued?

4. (10 pts) Jeremiah Claxton, CFA, is a junior portfolio manager for a large university endowment fund. Claxton's supervisor, Joanne LeMonte, has asked him to compare the valuation of Home Decor, Inc. and Lester's Companies, Inc. and make a recommendation for an addition to the fund's retail portfolio. LeMonte has specifically asked Claxton to consider the price-to-cash flow valuation metric when making his recommendation. Claxton has gathered the following information. Comparison Between Lester's and Home Decor (per share amounts) Trailing Recent Price CF por PACE Trailing FCFE per Shite CONSENS PFCFE S-Year Growth Forecast Share $47.8 $2.00 23.90 $0.36 132.78 17.5% 1.22 Lester's Home $28.4 $1.36 20.88 $0.99 28.69 22.2% 1.36 Claxton has also determined that the CAPM betas of the two firms are not significantly different| at the 1% level. Based on the information in the table. Are those two companies overvalued or undervalued