You forecast that the company is going to reduce costs in the future, thus improve profit margin from 10% to 15%, the sales and debt of the company are not going to change, so the asset turnover and equity multiplier ratio is going to remain at 0.5 and 1.5. There’s no interest expense and tax, so tax and interest burden ratios are at 1. Historically the company has a dividend payout ratio of 40%. Earnings per share today is $5, price today is $50. The industry PE ratio is 6 with 3% growth rate, is the company overvalued or undervalued?

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