Q4) Shares of General Motors are currently trading at $5. The firm just paid a $0.50 dividend. You expect the dividend to increase at 4% annually. You require an 11% return before you will purchase shares. Should you purchase these shares and if so, how much would you be willing to pay at most per share of this stock?

Yes you should purchase shares of this stock. You should pay no more than $7.43 per share.

Yes you should purchase shares of this stock. You should pay no more than $9.50 per share.

Yes you should purchase shares of this stock. You should pay no more than $4.23 per share.

No you should not purchase shares of this stock. At $5, the market price per share is higher than the intrinsic value per share.

Yes you should purchase shares of this stock. You should pay no more than $12.37 per share.