CORRECT ANSWER D. ARCHER’S STOCK IS UNDERVALUED BY APPROXIMATELY...

78.

Correct answer d. Archer’s stock is undervalued by approximately 25% as calculated below.

Estimated market value

= Industry average P/E ratio x Archer earnings per share

= 14.00 x $3.20

= $44.80

Archer market difference

= $44.80 - $36.00

= $8.80

Percentage difference

= $8.80 ÷ $36.00

= 24.4%