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Suppose the risk - free rate of return is 3 . 5 percent and the market risk premium is 8 percent. Stock U , which

Suppose the risk-free rate of return is 3.5 percent and the market risk premium is 8 percent. Stock U, which has a beta coefficient equal to 1.2, is currently selling fo
$27 per share. The company is expected to grow at a 4 percent rate forever, and the most recent dividend paid to stockholders was $2.50 per share. Is Stock U
correctly priced? Explain. Do not round intermediate calculations. Round your answers to one decimal place.
The required rate of return, that is
%, is
the expected rate of return, that is
%, which means that
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