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8.5 Melissa Cutt is thinking about buying some shares of EZLawnEquipment, at $45.07 per share. She expects the price of the stock to rise to

8.5

Melissa Cutt is thinking about buying some shares of EZLawnEquipment, at $45.07 per share. She expects the price of the stock to rise to $58.12 over the next 3 years. During that time she also expects to receive annual dividends of $6.35 per share.

a. What is the intrinsic worth of this stock, given a required rate of return of 11%?

b. What is its expected return?

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