What is the investors required rate of return on stock

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Reference no: EM13937322

Sure Tool Company is expected to pay a dividend of $2 in the upcoming year and to grow at a constant rate of 4%. The risk-free rate of return is 4% and the expected return on the market portfolio is 14%. The beta of Sure Tool Company's stock is 1.25.

(A) What is the investor’s required rate of return on Sure's stock?

(B) What is the intrinsic value of Sure's stock today?

(C) If Sure’s stock is traded at $13.5 today, is Sure’s stock market price under- or over-valued? Would you recommend to buy or short sell Sure’s stock?

Reference no: EM13937322

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