An investor with a required return of 16 percent for very risky investments in common stock has analyzed three firms and must decide which, if any, to purchase. The information is as follows:

Problem 11-03 An investor with a required return of 16 percent for very risky investments in common stock has analyzed three firms and must decide which, if any, to purchase. The information is as follows: Firm A B Current earnings Current dividend Expected annual growth rate in dividends and earnings Current market price $2.40 $1.00 6% $ 3.50 $2.90 2% $7.10 $6.80 -2% $ 19 $ 29 $ 40 a. What is the maximum price that the investor should pay for each stock based on the dividend-growth model? Round your answers to the nearest cent. Stock A: $ Stock B: $ Stock C: $ b. If the investor does buy stock A, what is the implied percentage return? Round your answer to two decimal places. % c. If the appropriate P/E ratio is 9, what is the maximum price the investor should pay for each stock? Round your answers to the nearest cent. Stock A: $ Stock B: $ Stock C: $ If the appropriate P/E ratio is 4, what is the maximum price the investor should pay for each stock? Round your answers to the nearest cent. Stock A: $ Stock B: $ X X Stock C: $