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You are supposed to analyze the price of Macy s ( ticker: M ) stock TODAY: ValueLine.com projects that next year s annual dividend for

You are supposed to analyze the price of Macys (ticker: M) stock TODAY:
ValueLine.com projects that next years annual dividend for M (D1) will be $0.70. For the next 5 years, the dividends are expected to grow at the rate of 13.0% per year (based on projections in ValueLine). Assume that the dividend in year 6 is expected to grow from D5 at the rate of 9.0%, and all the subsequent dividends until year 15 will grow at 9.0%. Assume that the dividend in year 16 is expected to grow from D15 at the rate of 5.0% and all the subsequent dividends will grow by 5.0% as well, forever.
Required rate of return: assume that the risk-free rate is equal to 5.0% per year forever and that the market risk premium from 2024 will stay constant forever as well. Assume the measure of economy-wide risk exposure M is associated with today will stay constant forever as well.
Based on the above information, do you conclude that M stocks are overvalued (and thus people should sell them before the price drops) or undervalued (and thus people should quickly start buying M stocks)? Explain why (based on numbers and 1-2 sentences).

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