A Firm Has a Current Price of $40 a Share

question 87

Multiple Choice

A firm has a current price of $40 a share, an expected growth rate of 11 percent and expected dividend per share (D1) of $2. Given its risk you have a required rate of return for it of 12 percent. Your expected rate of return and investment decision is as follows:

• A)10% - do not buy
• B)12% - do not buy
• C)14% - buy
• D)16% - buy
• E)18% - buy

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