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Can you answer this ASAP One year from now the price of Fearon United Inc. (FUI) stock is expected to be $24 per share. FUI

Can you answer this ASAP

One year from now the price of Fearon United Inc. (FUI) stock is expected to be $24 per share. FUI is also expected to pay its next dividend at that timeof $1.25 per share.

The Beta of FUI stock is .95, Treasury Bills currently yield 2% and the consensus forecast of the expected stock market return over the next year is 5%.

The following stock quotation taken from this mornings Globe and Mail Report on Business.

52 week

Hi Lo

Stock

Sym

P/E

Volume

100s

Yesterdays

Closing Price

Chg.

28.75

19.65

FUI

FU

10.2

170

$23.50

+.50

Required: There are 3 parts to this question...be sure to answer both parts for full credit.

  1. Based on the above information and using any appropriate tools, techniques or models we have been developing in class, what do you think the price of FUI stock should be.

  2. Is it currently over-valued, under-valued or correctly priced in the market as indicated by yesterdays closing price?

  3. If you own 500 shares of FUI stock today, would you buy more shares, sell the ones you own or simply keep the existing number of shares your own? Justify your decision consistent with the analysis you have shown for the above part a).

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