You are considering investing in ABC, Inc.'s stock which is selling at $45.95. Similar stocks return 16%. ABC's last dividend ABC was $4.50 and a 6% constant growth rate is anticipated. Should you purchase ABC, Inc.?

Yes, because the stock is underpriced by $3.85.

No, because the stock is overpriced by $3.85.

No, because the stock is overpriced by $1.75.

Yes, because the stock is underpriced by $1.75.

The IPO Pop is a phenomenon in which:

		the IPO faces negative publicity as it is underpriced and starts trading below the market expectations.
		there is a rapid increase in the stock price after trading begins.
		the IPO is underwritten by certain investment bankers for an underwriting spread.
		the offer is accurately priced eliminating possibilities of volatility when trading begins.