One-period valuation model for computing stock prices

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Reference no: EM131464274

Consider the one-period valuation model for computing stock prices. Suppose you are considering buying Wal-Mart stock, which has a price of $75.06 and a dividend of $1.88 per share, and then selling the stock one year from now. If your required return on investment is 15% and the stock is expected to be selling for $77 next year, what do you value the stock at and should you buy it?

A) The stock is valued at $68.59 and I would want to buy it.

B) The stock is valued at $68.59 and I would not want to buy it.

C) The stock is valued at $525.87 and I would not want to buy it.

D) The stock is valued at $75.06 and since it will sell for $77, I would want to buy it.

Reference no: EM131464274

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