Q: How to tell if stock is over or undervalued based on what's provided. My professor wrote 'Overvalued' but I'm confused as to why.

Thanks.

22 Numerical Example with Growth 1-b = 0.40 Given Eo = $2.50; b = 60%; ROE = 15%; k= 12.5% Then.. Po= (1-b) = 40% al E1 = $2.50 (1 + (.6).15)) = $2.73 D1 = $2.73 (1-6) = $1.09 Po = 1.09/(.125-.09) = $31.14 P/E = 31.14/2.73 = 11.4 DIE = (1 - 60)/(.125 - .09) = 11.4 g = 9% K-9.1250-0.6 =114 OVAT priced