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Your old friend from college, who works at StockPro in NYC, wants to sell you a stock with a current market price of $25.00. The

Your old friend from college, who works at StockPro in NYC, wants to sell you a stock with a current market price of $25.00. The stocks last dividend (D0) was $2.00, and earnings and dividends are expected to increase at a constant growth rate of 10%. Your required rate of return on this stock is 20%. Determine the true value of the stock and state whether or not you should buy and why or why not?

A. $27 Do Not Buy
B. $18 Buy
C. $22 Do Not Buy
D. $30 Buy

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