Sharbaugh Inc.$\text{'}$s most recent dividend was $$2\mathrm{.}00$ per share. The dividend is expected to grow at a rate of $4\%$ per year for the foreseeable future. If the market return is $13\%$ on investments with comparable risk, what should the stock sell for today?

a$.$ $$16\mathrm{.}00$

b$.$ $$22\mathrm{.}22$

c$.$ $$23\mathrm{.}11$

d$.,$$$50\mathrm{.}00$

e$.,$$$52\mathrm{.}00$

A stock is selling for $$20\mathrm{.}00(P_0).$ The projected selling price one year from now $(P_1)$ is $$22\mathrm{.}50,$ and the projected dividend payment one year from now $(D_1)$ is $$1\mathrm{.}00.$ What is the expected return on an investment in the stock made today?

a$.12\mathrm{.}50\%$

b$.5\mathrm{.}00\%$

c$.15\mathrm{.}56\%$

d$.17\mathrm{.}50\%$

You are considering investing in B & B$,$ Inc.$\text{'}$s stock and your broker has told you that you can purchase it for $$72.$ You require a retum $12\%$ for this type of investment. The last dividend $(D_0)$ that B & B paid was $$4$ and a $6\%$ constant growth rate is anticipated. Should you purchase B & B$,$ Inc.?

a$.$ No$,$ because the stock is overpriced by $$1\mathrm{.}33$

b$.$ No$,$ because the stock is overpriced by $$3\mathrm{.}33$

c$.$ Yes, because the stock is underpriced by $$1\mathrm{.}33$

d$.$ Yes, because the stock is underpriced by $$3\mathrm{.}33$

You are considering investing in ABC, Inc.$\text{'}$s stock which is selling at $$45\mathrm{.}95.$ Similar stocks retum $16\%.$ ABC's last dividend ABC was $$4\mathrm{.}50$ and a $6\%$ constant growth rate is anticipated. Should you purchase ABC, Inc.?

a$.$ No$,$ because the stock is overpriced by $$1\mathrm{.}75$

b$.$ No$,$ because the stock is overpriced by $$3\mathrm{.}85$

c$.$ Yes, because the stock is underpriced by $$1\mathrm{.}75$

d$.$ Yes, because the stock is underpriced by $$3\mathrm{.}85$

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