7. Berg Inc. has just paid a dividend of $2.00. Its stock is now selling for $48 per share. The firm is half as risky as the market. The expected return on the market is 14 percent, and the yield on U.S. Treasury bonds is 11 percent. If the market is in equilibrium, what rate of growth is expected? 2 line tamuc.edu/d21/common/assets/pdfjs-d21-dist/1.0.9..dered-pdf&fullscreen=d21-fileviewer-rendered-pdf-dialog&height=84880 A. 13% B. 10% C. 4% D. 8% E. -2% Correct Answer: 8. A stock is selling for $15 per share. The firm's income, assets, and stock price have been growing at an annual 15% rate and are expected to continue to grow at this rate for three more years. No dividends have been declared as yet, but the firm intends to declare a dividend of Dj = $2.00 at the end of the last year of its supernormal growth. After that, dividends are expected to grow at the firm's normal growth rate of 6%. The firm's required rate of return is 18%. The stock is A. Undervalued by $3.03 B. Overvalued by $3.03 C. Correctly valued D. Overvalued by $2.25 E. Undervalued by $2.25 Correct