Tangshan China's Stock Is Currently Selling for $160

question 175

Multiple Choice

Tangshan China's stock is currently selling for $160.00 per share and the firm's dividends are expected to grow at 5 percent indefinitely. In addition, Tangshan China's most recent dividend was $5.50. If the expected risk free rate of return is 3 percent, the expected market return is 8 percent, and Tangshan has a beta of 1.2, Tangshan's stock would be ________.

• A) overvalued because the market price is higher than the resulting share value
• B) undervalued because the market price is less than the resulting share value
• C) overvalued because the resulting share value is higher than the market value
• D) undervalued because the resulting share value is less than the market value

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Definitions:

Materials Management

The inbound movement and storage of materials in preparation for those materials to enter and flow through the manufacturing process.

Push Strategy

A supply chain strategy in which a company builds goods based on a sales forecast, puts those goods into storage, and waits for a customer to order the product.

Responsive Supply Chain

A supply chain structured to quickly respond to market changes and customer demands.

Put-away

The process of moving goods from the receiving area to their designated storage location within a warehouse or distribution center.