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Should Jane buy the stock

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Reference no: EM132986529

Question - Jane's sister-in-law, a stockbroker at Invest, Inc., is trying to get Jane to buy the stock of HealthWest, a regional HMO. The stock has a current market price of $25, its last dividend (D0) was $2, and the company's earnings and dividends are expected to increase at a constant growth rate of 10 percent. The required return on this stock is 20 percent. From a strict valuation standpoint, should Jane buy the stock? Provide the expected price of the stock E(P0) (format is: $XX.XX) and make a determination whether the stock should be purchased (format is: "Yes" or "No").

Reference no: EM132986529

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