Gent Inc. paid a dividend of $2 per share yesterday and the expected growth rate of

dividends to be 4% in the future. If the stock beta is 1.2, the risk-free rate 3% and the return on

the market portfolio 8%.

1) What is the required return of the common stock?

2) What is the intrinsic value of the common stock?

3) If the market price of this stock is $32 per share, would you buy or sell the stocks of this

company? Why?