4. (Common stock valuation)Wayne, Inc.'s outstanding common stock is currently selling in the market for $21. Dividends of $2.45 per share were paid last year, return on equity is 26 percent, and its retention rate is 21 percent.

a.What is the value of the stock to you, given a required rate of return of 17 percent?

b.Should you purchase this stock?

a.Given a required rate of return of 17 percent, the value of the stock to you is _____ (Round to the nearest cent.)

b.Should you purchase this stock? You should/should not purchase the stock because your expected value of the stock is greater than the current market price, indicating that the stock would be currently underpriced/overpriced in the market.