Let's assume that you're thinking about buying stock in West Coast Electronics. So far in your...

Let's assume that you're thinking about buying stock in West Coast Electronics. So far in your analysis, you've uncovered the following information: The stock pays annual dividends of $5.21 a share indefinitely. It trades at a P/E of 8.6 times earnings and has a beta of 1.19. In addition, you plan on using a risk-free rate of 4.00% in the CAPM, along with a market return of 9%. You would like to hold the stock for 3 years, at the end of which time you think EPS will be $9.77 a share. Given that the stock currently trades at $59.89, use the IRR approach to find this security's expected return. Now use the dividend valuation model (with constant dividends) to put a price on this stock. Does this look like a good investment to you? Explain.

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jeff jeffy answered 1 year ago

Let's assume that you're thinking about buying stock in WestCoast Electronics. So far in your...

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