Question
Sally's stock is currently selling for $160.00 per share and the firm's dividends are expected to grow at 5 percent indefinitely. In addition, Sallys most
Sally's stock is currently selling for $160.00 per share and the firm's dividends are expected to grow at 5 percent indefinitely. In addition, Sallys most recent dividend was $5.50. If the expected risk free rate of return is 3 percent, the expected market premium is 4 percent, and Sally has a beta of 1.2, Sally 's stock would be ________.
A. | overvalued because the market price is higher than the resulting share value | |
B. | overvalued because the resulting share value is higher than the market value | |
C. | undervalued because the resulting share value is less than the market value | |
D. | undervalued because the market price is less than the resulting share value |
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