Corporate Finance

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Characteristics of Undervalued Firms

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Which of the following would you consider as the best indicator of an undervalued firm?

A

A firm with a P/E ratio lower than the average P/E ratio for the firm's peer group.

B

A firm with a lower P/E ratio than its peer group, and a lower expected growth rate.

C

A firm with a lower P/E ratio than its peer group, a higher expected growth rate, and higher risk.

D

A firm with a lower P/E ratio than its peer group, a higher expected growth rate, and lower risk.