Question text

Michelle wants to value the stock of Gamma Corporation and gathers the following information:

• Current market price per share = $70
• Current book value per share = $28
• Perpetual ROE = 20%
• Perpetual growth rate = 5%
• Required rate of return on equity = 11%

The stock is most likely:

Select one:

a. Undervalued.

b. Fairly valued.

c. Overvalued.