Valuation

Suppose the required return of a companys shares is 11%. In which of the following circumstances would you necessarily conclude that the companys shares are undervalued?

Select one:

a.

The companys price-to-book ratio is 1.1 and return on common equity is expected to be below 11%

b.

The companys price-to-book ratio is 1.1 and return on common equity is expected to be above 11%

c.

The companys price-to-book ratio is 0.9 and return on common equity is expected to be above 11%

d.

The companys price-to-book ratio is 0.9 and return on common equity is expected to be below 11%