Problem $11-03$

An investor with a required return of $14$ percent for very risky investments in common stock has analyzed three firms and must decide which, if any, to

purchase. The information is as follows:

a$.$ What is the maximum price that the investor should pay for each stock based on the dividend$-$growth model? Round your answers to the nearest

cent.

Stock A: $

Stock B: $

Stock C: $

b$.$ If the investor does buy stock $A,$ what is the implied percentage return? Round your answer to two decimal places.

$\%$

c$.$ If the appropriate P$/$E ratio is $13,$ what is the maximum price the investor should pay for each stock? Round your answers to the nearest cent.

Stock A: $

Stock B: $

Stock C: $

If the appropriate P$/$E ratio is $4,$ what is the maximum price the investor should pay for each stock? Round your answers to the nearest cent.

Stock A: $