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Suppose a stock exhibits no dividend growth; the current dividend is $21, and the required rate of return is 7%. The share price is currently $360.
-The stock is currently

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Quizplus · Accepted Answer

Using the dividend discount model for a stock with no growth, the value of the stock is calculated as the dividend divided by the required rate of return. Thus, the value = $21 / 0.07 = $300. The stock is currently priced at $360, which is 20% higher than its calculated value of $300, indicating it is overvalued by 20%.

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