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Suppose the risk-free rate of return is 4 percent and the market risk premium is 7.5 percent. Stock AU has a beta coefficient of 1.6
Suppose the risk-free rate of return is 4 percent and the market risk premium is 7.5 percent. Stock AU has a beta coefficient of 1.6 and currently selling for $11.55 per share. The company is expected to grow at a 5 percent rate forever and the most recent dividend paid to stockholders was $1.10 per share. Is Stock AU priced correctly? Show the results and explain each answer.
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