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Should purchase the shares and explain

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Reference no: EM132616664

Problem 1: Aussie's most recent dividend was $3.00 per share and is selling today in the market for $60. The dividend is expected to grow at a rate of 5% per year for the foreseeable future. If the market return is 11% on investments with comparable risk, should you purchase the shares?

Option 1) No, because the share is overpriced at $2.5.

Option 2) No, because the share is overpriced at $7.5.

Option 3) Yes, because the share is under priced at $2.5.

Option 4) Yes, because the share is under priced at $7.5.

Reference no: EM132616664

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