We've always assumed our shareholders demand a return of 15.0%. That assumption has worked very well for us in the past, so let's keep it. Next on our agenda is... (what the board thinks)

Back at your office you call up Yahoo! Finance and find the following:

• current price on your company's stock is $87.50
• most recent dividend was $3.40, and it had increase 2.0% from the previous period, which met the company's existing goal of growing dividends 2.0% every year.

What did you just learn?

Group of answer choices

Your board members should lower the dividend significantly or reduce its growth rate (in addition to brushing up on how to calculate required return).

Based on market information, shareholders are requiring a 6.0% return on your company's stock, quite far off from what the board is assuming. This means that capital investment projects using the cost of equity capital could be discounted too much.

Based on market information, shareholders are requiring a 6.0% return on your company's stock, quite far off from what the board is assuming. This means that the company may be accepting some positive-NPV capital investment projects that should be rejected.

Please explain your answer either with excel calculations or words!