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?