Hatter Enterprise paid a dividend last year of $3.25, which is expected to grow at a constant rate of 7%. Hatter has a beta of 1.5 and their stock is currently selling for $62. If the market risk premium is 6% and the risk-free rate is 3%, should you purchase Hatter's stock?
A)No, because it is overvalued $7.55
B)Yes, because it is undervalued $7.55
C)No, because it is overvalued $18.95
D)Yes, because it is undervalued $18.95

Question

Quizplus · Accepted Answer

The Answer of Hatter Enterprise paid a dividend last year of $3.25, which is expected to grow at a constant rate of 7%. Hatter has a beta of 1.5 and their stock is currently selling for $62. If the market risk premium is 6% and the risk-free rate is 3%, should you purchase Hatter's stock?
A)No, because it is overvalued $7.55
B)Yes, because it is undervalued $7.55
C)No, because it is overvalued $18.95
D)Yes, because it is undervalued $18.95

Hatter Enterprise Paid a Dividend Last Year of $3