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Should you purchase the stock

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Question - The Medical Equipment Company paid P2.25 common stock dividend last year. The company's policy is to allow its dividend to grow at 5 percent per year indefinitely.

Required -

a. What is the value of the stock if the required rate of return is 8 percent?

b. What is the value of the stock if the required rate of return is 10 percent?

c. Assuming that the stock is currently selling at the market for P80 per share, and the required rate of return is 8%? Should you purchase the stock? Is the stock undervalued or overvalued?

Reference no: EM132984497

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