1. Samphone, Inc. has a P/E ratio of 23. You collect data for firms that you believe have similar fundamental characteristics to Samphone, and find that the average P/E ratio for those firms is 20. If Samphone's current earnings per share is $5, then:

A) Samphone is overvalued and should be priced at $100 per share

B) Samphone is undervalued and should be priced at $100 per share

C) Samphone is overvalued and should be priced at $115 per share

D) Samphone is undervalued and should be priced at $115 per share

2. A project with which one of these sets of attributes would you be most likely to reject?

Low operating leverage, sales projected at the economic break-even level, and an option to expand.

High operating leverage, sales projected at the economic break-even level, and an option to adandon.

High operating leverage, sales projected at the accounting break-even level, and no option to abandon.

Low operating leverage, sales projected at the accounting break-even level, and an option to abandon.