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Suppose the risk - free rate of return is 4 . 5 percent and the market risk premium is 6 percent. Stock U , which

Suppose the risk-free rate of return is 4.5 percent and the market risk premium is 6 percent. Stock U, which has a beta coefficient equal to 0.6, is currently selling for $40 per share. The company is expected to grow at a 4 percent rate forever, and the most recent dividend paid to stockholders was $2.00 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 (greater than, lower than, equal to) the expected rate of return, that is (___%)which means that (the selling price is too low, the selling price is too high, the stock is correctly priced)

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