Aeryn Soon is a potential investor of Hippy Dippy Inc.'s preferred stock, which is currently selling for $475 per share. Hippy Dippy pays an annual dividend of $40, and Aeryn's required return is 8%. Should she purchase this preferred stock?
A) Yes, because the stock is undervalued by $25.
B) Yes, because the stock is overvalued by $25.
C) No, because the stock is undervalued by $25.
D) No, because the stock is overvalued by $25.
Correct Answer:
Verified
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