question 11

You are considering investing in ABC, Inc.'s stock which is selling at $45.95. Similar stocks return 16%. ABC 's last dividend ABC was $4.50 and a 6% constant growth rate is anticipated. Should you purchase ABC, Inc.? Yes, because the stock is underpriced by $3.85. No, because the stock is overpriced by $3.85. No, because the stock is overpriced by $1.75. Yes, because the stock is underpriced by $1.75