7. You are facing three stock investment alternatives, Stock A, Stock B and Stock C. Given the following information, please indicate which stock is (are) overvalued, which stock is (are) undervalued, and which stock is (are) correctly priced based on the required returns calculation using the Capital Asset Pricing Model. The risk free rate is 3% and risk premium on the market portfolio is 7%. (5 points) Chapter 7: Stock Valuation 8. Genentech is expecting both earnings and dividends to grow by 15% in Year 1,0% in Year 2, by 5% in Year 3 , and at a constant rate of 10 percent in Year 4 and thereafter. The required return on Genentech is 15 percent, and it sells at its equilibrium current price $30.63. What is the approximate value of its expected dividend next year? A) $0 B) $1.25 C) $1.75 D) $2.05 E) $2.85 9. Energy Console is a new altemative energy company that is expected to experience short-term supernormal dividend growth rates of 50% in year 1,40% in year 2 and 25% in year 3 . After 3 years of supernormal growth, this company dividend is expected to grow at a constant rate of 5% However, in most recent month, analysts have made downward projection on its short-term growth rates to 10% in year 1,5% in year 2 and 6.75% in year 3 and long-term constant growth rate of 5% due to uncertainty of the world economy. If the most recent dividend paid is $2 per share and its required return remains at 15%, approximately how much do you expect the reduction in Energy Console's stock price per share today? A) $20.91 B) $18.14 C) $15.34 D) $23.16 E) $5.04