Question
Three people are looking to purchase stock PPP that is predicted to raise its dividend by 3% annually. The company pays a 82 cent dividend.
Three people are looking to purchase stock PPP that is predicted to raise its dividend by 3% annually. The company pays a 82 cent dividend. Person A does not have much information, just what they heard on television, and feels the stock could go up but because of the risk involved needs a 13% return. Person B read an article on the stock and has done some research into what the company's prospects for the future are so feels that there is lower risk and only needs a 9% return. Person C has talked to his broker, received a research report, and feels there is only a small risk and can live with a 7% return. The stock is currently selling for $15.74. Which of the three will buy the stock based on whether the stock is fairly valued? Show your work? According to the text and lectures, would the prices that these three people would pay for the stock change if the Federal Reserve cut interest rates? What would be the effect on the financial markets?
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