The following information is relevant to Question 2-3

An analyst has gathered data valuation multiples for Merck(MRK) and three other pharmaceutical companies, which serve as comparable firms: Pfizer ( PFE), Eli Lilly (LLY), and Sanofi-Aventis (SNY).

Valuation multiplies for pharmaceutical companies in April 2017:

Company Symbol	MRK	PFE	LLY	SNY	Comparable average
Price/earnings	9.08	15.42	8.46	10.15	11.34

2- An analyst is comparing the valuation multiples of Merck with those of three comparable firms. He is likely to conclude that MRK is ___ _______ using the price/earnings ratio

A) Undervalued

B) Overvalued

3- The analyst is estimating the value of equity of Medtech, a private pharmaceutical company with $ 10 million in earnings. Using relative valuation, what is the value of the equity of this company? What the equity value per share if the firm has 5 million shares outstanding?