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Schmendiman, Inc., is the sole manufactu rer of schmedimite. Assume that the com pany's common stock can be valued usin g the constant dividend growth
Schmendiman, Inc., is the sole manufactu rer of schmedimite. Assume that the com pany's common stock can be valued usin g the constant dividend growth model. Yo u expect that the return on the market wil I be 14 percent and the risk free rate is 4 percent. You have estimated that the divi dend one year from now will be $3.8, the dividend will grow at a constant 6 percen t, and the stock's beta is 1.5. The commo In stock is currently selling for $30 per sh are in the marketplace. a. What value w ould you place on one share of this com mon stock? b. Is the company's comm on stock overpriced, underpriced, or fairly priced
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