Equity question on CFA Practice paper

CFA Level I Equities
#1

An analyst gathers the following information about a company’s equity security:

  • ●● Trailing price-to-earnings multiple: 10x
  • ●● Last year’s EPS: $5.00
  • ●● Forecasted EPS growth rate: 10%

If the analyst estimates that the security is undervalued by $4, the estimated intrinsic value is closest to:

  1. A $46.
  2. B $59.
  3. C $54.

C is correct. The current market value, or price, of the security is calculated as follows:
P= P/E x E
where:
P = the current market value, or price, of the security P/E = the trailing price to earnings multiple (10x)
E = last year’s EPS ($5)
The current market value of the security is: P = (P/E) × E = 10 × $5 = $50.
The security is undervalued by $4, therefore the estimated intrinsic value is $50 + $4 = $54.

Doesn’t make sense here. I thought P= P/E x E this formula for comparative valuation is finding the intrinsic Value, as the Current market value is determined by the market. So in that case, it should be just 10x5 = $50 ?
Hope to clarify this thank you.

#2

True if you have a justified P/E ratio.

When you have an actual (i.e., market) P/E ratio, it calculates the market price.

Here, the P/E ratio is actual (“An analyst gathers . . . information”).

#3

Oh thank you, this clear my misunderstanding.