Actions should the investor pursue

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Reference no: EM131566533

Suppose Apple's stock is currently trading for $112.10 per share, and just paid a dividend of $2.08 per share. Investors expect dividends to grow at 8.5%, forever; and investors require a 12% rate of return on their investment. Given this information, which of the following actions should the investor pursue?

a. Investors should not purchase Apple stock because the modeled price is lower than the observed price

b. Investors should purchase Apple stock because the observed price is lower than the modeled price

c. Investors should not purchase Apple stock because the observed price is lower than the modeled price

d. Investors should purchase Apple stock because the modeled price is lower than the observed price.

Reference no: EM131566533

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