The board of directors of API, a relatively new electronics manufacturer, has decided to continue

paying a common stock dividend to increase the attractiveness of the stock in the free market.

The board plans to pay $$3\mathrm{.}00$ per share in the coming year $($i$.$e$.,$ next year$)$ and anticipates that its

future dividends will increase at an annual rate consistent with that experienced over the period

from $20$X$0-20$X$3($see below$).$ The company currently has a beta of $1\mathrm{.}1,$ the rate of return for

the market is expected to be $10\%$ and the risk$-$free rate is currently $4\%.$ Given this scenario, what

is the current value of API's common stock? If the current market price is $$40\mathrm{.}00$ per share,

should you purchase this stock? Briefly, explain your answer. $($HINT: This problem requires a

three$-$part calculation to solve it$).$

$.$

Year Dividend

$20$X$3$ $$2\mathrm{.}81$

$20$X$2$ $$2\mathrm{.}70$

$20$X$1$ $$2\mathrm{.}60$

$20$X$0$ $$2\mathrm{.}50$