XYZ company\'s common stock paid $2.50 in dividends last year. Dividends are exp
ID: 2624370 • Letter: X
Question
XYZ company's common stock paid $2.50 in dividends last year. Dividends are expected to grow at a 12-percent annual rate forever. If XYZ's current market price is $40.00, and your required rate of return is 23 percent, should you purchase the stock?
Answer
No, the percentage return on the stock is too high, thus it is too risky.
No, the stock is overvalued
Yes, the stock is expected to return more than you require.
Not enough information is given.
No, the percentage return on the stock is too high, thus it is too risky.
No, the stock is overvalued
Yes, the stock is expected to return more than you require.
Not enough information is given.
Explanation / Answer
No, the stock is overvalued
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