What is the value of the share to you

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You are thinking about investing in a company share which is currently priced at $49.50. The company paid a dividend of $2.50 last month. The dividend is expected to grow at a constant rate of 6 per cent for the foreseeable future. You normally require a return of 11 per cent on shares of similar risk.

(i) What is the value of the share to you?

(ii) Is the share overpriced, under-priced, or correctly priced? Explain clearly.

(iii) Would you buy this share? Explain your answer by referring to the material covered in this unit?

Reference no: EM132534728

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