Question:

Apex Financial Ltd. is interested in investing in Scion Systems Inc. Scion s current dividend is $5.50 and its shares are selling for $40. The required rate of return for firms like Scion is 8 percent. Apex has conducted an extensive analysis of the company and believes that the dividend growth rate should be 5 percent.

a. Should Apex buy the stock at $40? Why or why not?

b. Do you expect the stock price to stay at $40? Explain.

Please proper explain and do not copy from Chegg. otherwise i have to report the answer. (step by step explanation).