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Let ' s assume that you're thinking about buying stock in West Coast Electronics. So far in your analysis, you've uncovered the following information: The
Lets assume that you're thinking about buying stock in West Coast Electronics. So far in your analysis, you've uncovered the following information: The stock pays annual dividends of $ a share indefinitely. It trades at a PE of times earnings and has a beta of In addition, you plan on using a riskfree rate of in the CAPM, along with a market return of You would like to hold the stock for years, at the end of which time you think EPS will be $ a share. Given that the stock currently trades at $ use the IRR approach to find this securitys expected return. Now use the dividend valuation modelwith constant dividends to put a price on this stock. Does this look like a good investment to you? Explain.
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