2A2S ARCHER INC. HAS 500,000 SHARES OF $10 PAR VALUE COMMON STOCK OUT...

78.

CSO: 2A2e

LOS: 2A2s

Archer Inc. has 500,000 shares of $10 par value common stock outstanding. For the

current year, Archer paid a cash dividend of $4.00 per share and had earnings per share of

$3.20. The market price of Archer’s stock is $36 per share. The average price/earnings

ratio for Archer’s industry is 14.00. When compared to the industry average, Archer’s

stock appears to be

a.

overvalued by approximately 25%.

b.

overvalued by approximately 10%.

c.

undervalued by approximately 10%.

d.

undervalued by approximately 25%.