Question details

8-16. (Common stock valuation)
$ 10.00

The common stock of NCP paid $1.32 in dividends last year. Dividends are expected to grow at an 8% annual rate for an indefinite number of years.

a) If NCP’s current market price is $23.50, what is the stock’s expected rate of return?

b) If your required rate of return is 10.5%, what is the value of the stock for you?

c) Should you make the investment?

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