86. An investor is considering the purchase of stock in Company H and expects the following dividends at the end of each of the next 3 years:

Year 1: $10.50 per share

Year 2: $11.00 per share

Year 3: $11.50 per share

He expects to sell the stock for $306 per share in 3 years time and he requires a required rate of return of 12% p.a. to invest in the company. If Company Hs shares are currently trading at $259, the investor will most likely consider the stock to be:

1. overvalued.

2. undervalued.

3. fairly valued.