A common share just paid a dividend of Do = $2.00. The required rate of return is rs=

8.0%, and the constant growth rate is g = 4.0%. The stock is currently trading at a

price of $52.00 a share. Which of the following statements is correct?

a. The value of the stock, when valued using the constant growth model, is

significantly lower than the current market price, which indicates that the stock is

not in equilibrium. Therefore, it is expected that the share price will decrease from

its current level toward its calculated value

b. The value of the stock, when valued using the constant growth model, is

significantly higher than the current market price, which indicates that the stock is

not in equilibrium. Therefore, it is expected that the share price will increase from

its current level toward its calculated value

c. The value of the stock, when valued using the constant growth model, is almost

exactly the same as the current market price, which indicates that the stock is in

equilibrium. Therefore, it is expected that the share price will remain at its current

level.