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(b) Lexus Toys just paid a dividend of $5.00 (Do). Lexuss growth rate is expected to be a 4% per annum for 2 years, after
(b) Lexus Toys just paid a dividend of $5.00 (Do). Lexuss growth rate is expected to be a 4% per annum for 2 years, after which dividends are expected to grow at a constant rate of 7% forever. Lexus's required return on stock is 10%. The current stock price of Lexus's common stock is $170. Determine whether this stock is under- or over-valued
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