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Haulin' It Towing Company Is Selling a Stock for $16

Question 104

Multiple Choice

Haulin' It Towing Company is selling a stock for $16.The stock just paid a dividend of $.60 and this dividend is expected to grow by 15% per year for three years.After that it will grow at a constant rate of 4%.The stock's beta is 1.7, the risk-free rate of interest is 1.75% and the market risk premium is 5.25%.Should you buy the stock? (Round to dollars and cents or two decimal points)


A) No, the stock is not a good value since it is only worth about $8.
B) No, the stock is not a good value since it is only worth about $12.
C) Yes, the stock is a good value since it should sell for about $25.
D) Yes, the stock is a good value since it should sell for about $18.

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