To compare across in a sector, you are looking to price-to-book value ratio. Given the relationship between price-to-book value (PBV) ratios and return on equity (ROE), you are now about to value of integrated oil firms using a regression analysis. To run the regression analysis, you collect the following table which reports the PBV ratios, and ROEs.

Integrated Oil Firms	Price-to-Book Value (PBV) Ratio	Return on Equity (ROE)
Firm 1	0.54	7.47%
Firm 2	0.64	-4.83%
Firm 3	0.95	6.28%
Firm 4	1.45	10.33%
Firm 5	1.72	13.96%
Firm 6	2.15	16.44%
Firm 7	2.40	14.49%
Firm 8	3.03	15.69%
Firm 9	3.24	13.43%
Firm 10	3.53	10.67%

1. Regress of PBV on ROE and you will have the following results. Fill in the blanks (Note: Round to the nearest tenth. e.g. 3.452 => 3.5)

	Coefficients	t-Statistics
Intercepts		1.5
ROE		2.5

2. Using the estimated regression model from the above result, calculate the respective predicted PBV multiples and fill in the blanks (Note: Round to the nearest hundredth. e.g. 3.452 => 3.45)

Integrated Oil Firms	Price-to-Book Value (PBV) Ratio	Predicted PBV multiples
Firm 1	0.54	1.64
Firm 2	0.64	0.26
Firm 3	0.95
Firm 4	1.45
Firm 5	1.72	2.36
Firm 6	2.15	2.64
Firm 7	2.40	2.42
Firm 8	3.03
Firm 9	3.24	2.30
Firm 10	3.53

3. Based on the calculated PBV, identify whether Firm 3, 4, 8, 10 are undervalued or overvalued. Fill in the blanks in the following table. (Note: type either "undervalued" or "overvalued")

Firms	Valuation (Undervalued/Overvalued)
Firm 3
Firm 4
Firm 8
Firm 10

4. Complete the following sentence based on your analysis by filling in the blanks.

Firm ___ and ___ are less than their fundamental value (i.e., the predicted PBV). Thus, you should make (select "buy" or "sell") recommendation.