Lets assume that youre thinking about buying stock in West Coast Electronics. So far in your analysis, youve uncovered the following information: The stock pays annual dividends of $5.06 a share indefinitely. It trades at a P/E of 9.7 times earnings and has a beta of 1.18. In addition, you plan on using a risk-free rate of 5.00% in the CAPM, along with a market return of 11%. You would like to hold the stock for three years, at the end of which time you think EPS will be $9.42 a share. Given that the stock currently trades at$62, use the IRR approach to find this securitys expected return. Now use the dividend valuation model (with constant dividends) to put a price on this stock. Does this look like a good investment to you? Explain.

o 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 stock pays annual dividends of $5.06 a share indefinitely It trades at a P/E of 9.7 times earnings and has a beta of 1.18. In addition, you plan on using a risk-free rate of 5.00% in the CAPM, along with a market return of 11%. You would like to hold the stock for 3 years, at the end of which time you think EPS will be $9.42 a share. Given that the stock currently trades at $62.00, use the IRR approach to find this security's expected return. Now use the dividend valuation model (with constant dividends) to put a price on this stock. Does this look like a good investment to you? Explain. This security's expected retum (IRR) is % (Round to two decimal places.) The value of the stock is $1. (Round to the nearest cent.) Using the dividend valuation model (with constant dividends), the value of the stock is $. (Round to the nearest cent.) Does this look like a good investment to you? Explain. (Select the best choice below.) O A. No, the stock looks like it would not make a good investment. It has a justified price that is above its current market price, and its expected return higher than the required return. OB. No, the stock looks like it would not make a good investment. It has a justified price that is below its current market price, and its expected return is lower than the required return. OC. Yes, the stock looks like it would make a good investment. It has a justified price that is below its current market price, and its expected return is lower than the required retum. OD. Yes, the stock looks like it would make a good investment. It has a justified price that is above its current market price, and its expected return is higher than the required return