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

$5.22

a share indefinitely. It trades at a P/E of

11.1

times earnings and has a beta of

1.15.

In addition, you plan on using a risk-free rate of

4.00%

in the CAPM, along with a market return of

9%.

You would like to hold the stock for 3 years, at the end of which time you think EPS will be

$8.28

a share. Given that the stock currently trades at

$73.95,

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.