Assume a compnay just finished paying an annual dividend of $3. You look up their beta and it equals 0.5. The current risk-free rate equals 2%. Assume a market return of 7%. Merck's current stock price is $100.

1) now assume that YOU expect the company to grow its dividend at 1% in perpetuity. If you are sure, what should you do?

(select: buy, or, sell) then, (select: over valued, or, undervalued)

i should ____ the company stock since it is ___.

4) What is the equity beta for a firm wit asset beta equal to 0.9, and D/E ratio of 0.4, and a tax rate equal to 35%?