Schmendiman, Inc., is the sole manufacturer of schmedimite. Assume that the company`s common stock can be valued using the constant dividend growth model. You expect that the return on the market will be 14 percent and the risk free rate is 4 percent. You have estimated that the dividend one year from now will be $3.8, the dividend will grow at a constant 6 percent, and the stock`s beta is 1.5. The common stock is currently selling for $30 per share in the marketplace.

a.What value would you place on one share of this common stock?

b.Is the company`s common stock overpriced, underpriced, or fairly priced?