ABC Inc. has just announced a dividend of 0.30 and the dividend is expected to grow by 3% per year forever.

The beta () of the stock is 0.8, the risk free return is 2% and the market risk premium is 5%.

If the stock is currently traded at 12, then which of the following statements is true for ABC's stock?

A.

The stock currently is fairly priced

B.

The stock's required rate of return is 8%

C.

The stock currently is underpriced

D.

The stock currently is overpriced