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Answer: Price-to-Book (P/B) ratio
The **Price-to-Book (P/B)** ratio for the company is calculated as $30 / $40 = 0.75, which exceeds the historical benchmark of 0.6. This indicates the shares are overvalued based on the P/B ratio. - **Option B (P/E ratio)**: The P/E ratio is $30 / $3 = 10, below the historical benchmark of 12, suggesting undervaluation. - **Option C (P/CF ratio)**: The P/CF ratio is $30 / $4 = 7.5, below the historical benchmark of 8, also indicating undervaluation. Thus, the correct answer is **A**, as the P/B ratio is the only multiple where the current value exceeds the benchmark, signaling overvaluation.
Author: LeetQuiz Editorial Team
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An analyst evaluates a company's historical price multiples and gathers the following data:
$3.00$4.00$40.00$30, the company's shares are most likely overvalued based on which of the following multiples?A
Price-to-Book (P/B) ratio
B
Price-to-Earnings (P/E) ratio
C
Price-to-Cash Flow (P/CF) ratio