EXERCISE #3 The stock of XQV is trading at $36. Its expected rate of return is 13%. The expected earnings per share this year are D1 = $3.24; dividends will grow at g=4% per year. We value the stock using the growth formula P0 =D1 / (r-g).

The risk-free rate is 4%, and the market risk premium is 8%. The companys beta is 1.2. Is the stock overpriced or underpriced. What is its alpha?

The stock is .. and its alpha is