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You are a financial analyst and are considering the stock of Firm XYZ for possible addition to a client's portfolio. You use Gordon's constant growth

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You are a financial analyst and are considering the stock of Firm XYZ for possible addition to a client's portfolio. You use Gordon's constant growth model to determine the fair value of common stock to be added to any client portfolio, Firm XYZ has a current dividend (Do) of $2.00 which is expected to grow at a constant rate of 4% indefinitely. Assume the risk free rate is 4%, the expected market return is 10%, and that Firm[XYZ's stock has a beta of 2.0. If the current market price of Firm XYZ is $15.00 per share, should this stock be added to your client's portfolio? In solving this problem be sure to: 1) translate the above data into the appropriate equations, 2) solve for the Gordon model value of the security, and 3) decide whether to add the security to your client's portfolio and explain why. N:B: Show your detail work. If needed, equations can be written by using the tool bar shown right above the answer text box

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