The required rate of return

Reference no: EM13769632

Linen Supply Co. paid a dividend of $3.25 on its common stock yesterday. The company's dividends are expected to grow at a constant rate of 5.5% indefinitely. The required rate of return on this stock is 17.5%. You observe a market price of $27.50 for the stock. Should you purchase this stock?

a. Yes, the market price is below the intrinsic value of the stock.

b. Yes, but only if you can keep the stock at least 5 years.

c. No, the growth rate in dividends is too far below the required return

d. no, the market price is abo e the intrinsic value of the stock

Reference no: EM13769632

Questions Cloud

Environmental study-scientific method : Explain the scientific method? what are the factors involved when addresing an environmental problem?

Does human service practice in the mental health setting : What role does human service practice play in the pretrial diversion setting specifically? At what point, if any, does human service practice in the mental health setting converge on the pretrial diversion setting

Material that is strongly associated with a culture : When an artist freely adapts material that is strongly associated with a culture other than his or her own, does that artist have a special responsibility to avoid offending some members of that culture?

Write a paper is to develope an argument on cults : Write a paper is to develope an argument on Cults and provide persuasive support for your thesis using strong reasons and clear evidence.

The required rate of return : Linen Supply Co. paid a dividend of $3.25 on its common stock yesterday. The company's dividends are expected to grow at a constant rate of 5.5% indefinitely. The required rate of return on this stock is 17.5%. You observe a market price of $27.50..

Define the numeric ip address of a static ip host : From a security standpoint, it is more desirable to use the numeric IP address of a static IP host, such as an e-mail server, than to allow the address to be looked up the Domain Name Service.

Identify at least two specific regions of the world : Terrorist organizations have spread their base of operations and training to all parts of the world. Identify at least two specific regions of the world where terrorist groups are operating successfully, and discuss why these regions serve as breedin..

How would you respond to given letter if you were dear margo : How would you respond to this letter if you were Dear Margo? Do love and deception have anything to do with each other? And if so, how can any relationship last?

Basic knowledge of treatment modalities for alcohol : Based on the treatment modalities that you have learned in this class along with your basic knowledge of treatment modalities for alcohol and/or substance abuse, do the following: Identify 2 treatment modalities for Mr. Moore that you believe would..

User Account

All Pages