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Common stock valuation

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The common stock of KPD paid $1 in dividends last year. Dividends are expected to grow at an 8 percent annual rate for an indefinite number of years.

a. If KPD's current market price is $25, what is the stock's expected rate of return?

b. If your required rate of return is 11 percent, what is the value of the stock for you?

c. Should you make the investment?

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Solution Summary

Common stock valuation is figured. The stock expected rate of the return is determined. The expert determines whether you should make an investment.

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a. If KPD's current market price is $25, what is the stock's expected rate of return?

Dividend at the end of the year is expected to be: ...

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