Question
Common stock valuation)Wayne, Inc.'s outstanding common stock is currently selling in the market for $28. Dividends of $3.21 per share were paid last year, return
Common stock valuation)Wayne, Inc.'s outstanding common stock is currently selling in the market for
$28.
Dividends of
$3.21
per share were paid last year, return on equity is
18
percent, and its retention rate is
25
percent.a.What is the value of the stock to you, given a required rate of return of
15
percent?
b.Should you purchase this stock?
Question content area bottom
Part 1
a.
Given
a required rate of return of
15
percent, the value of the stock to you is
$enter your response here.
(Round to the nearest cent.)
Part 2
b.Should you purchase this stock? (Select from the drop-down menus.)
You
should
should not
purchase the stock because your expected value of the stock is
greater
than the current market price, indicating that the stock would be currently
underpriced
overpriced
in the market.
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