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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 stock pays
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 $5.24 a share indefinitely. It trades at a P/E of 9.4 times earnings and has a beta of 1.19. 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 $7.85 a share. Given that the stock currently trades at $56.68, 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. III. This security's expected return (IRR) is %. (Round to two decimal places.) The value of the stock is $ (Round to the nearest cent.) - Using the dividend valuation model (with constant dividends), the value of the stock is $ (Round to the nearest cent) + Ek Does this look like a good investment to you? Explain. (Select the best choice below.) of ? OA. 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 return. O B. 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. O C. 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 is higher than the required return 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
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