KDP's Most Recent Dividend Was $2

question 57

Multiple Choice

KDP's most recent dividend was $2.00 per share and is selling today in the market for $70. The dividend is expected to grow at a rate of 7% per year for the foreseeable future. If the market return is 10% on investments with comparable risk, should you purchase the stock?

• A) No, because the stock is overpriced $1.33.
• B) No, because the stock is overpriced $3.33.
• C) Yes, because the stock is underpriced $1.33.
• D) Yes, because the stock is underpriced $3.33.

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