Rene is considering purchasing Stock ABC that has the following characteristics:

Earnings per share today = $2.00

Dividend Payout Ratio = 40%

Dividend growth rate = 4%

Rene requires a return of 8% on risky securities like Stock ABC. Would Rene find the stock rich, cheap or fairly priced if the stock price in the market is $22.00? (hint: first compute D₀ using the payout ratio)

Group of answer choices

Rich

Fairly Priced

Cheap