Suppose that we observe the following information for a company that we are trying to value (ERIC) and two matching companies:

Ratio    ERIC          MATCH1                MATCH2
P/E            10                      20                                15

Please answer each question:

a.  Based on this information, is ERIC undervalued or overvalued? Justify your answers.

b.  If ERIC has EPS of $2.0, what would an appropriate target price be for ERIC using relative valuation?