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The current market price of a share of common stock is $68. The most recent dividend paid on the stock now is $6 [D0]. The
The current market price of a share of common stock is $68. The most recent dividend paid on the stock now is $6 [D0]. The dividends are expected to grow at a constant rate of 7% per year for ever. The required rate of return on the common stock is 16%. Then the following is true according to the dividend growth model:
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the stock is overpriced
the stock is correctly priced
the stock is underpriced
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