Suppose the risk-free rate of return

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Suppose the risk-free rate of return is 3.5 percent and the market risk premium is 7 percent. Stock U, which has a beta coefficient equal to 0.9, is currently selling for $28 per share. The company is expected to grow at a 4 percent rate forever, and the most recent dividend paid to stockholders was $1.75 per share. Is Stock U correctly priced? Explain.

Reference no: EM13807936

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