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James Doyle is contemplating investing in the stock of Pyramid Construction, which is currently trading for...

James Doyle is contemplating investing in the stock of Pyramid Construction, which is currently trading for $62.25 per share. The company recently paid a dividend of $2.80 per share. Analysts forecast that the company's dividend will grow at a rate of 14% for the next 5 years, after which the dividend growth rate will stabilize at 6% into perpetuity. Given a required rate of return of 12%, the stock is currently most likely:

Select one:

a. Undervalued.

b. Overvalued.

c. Fairly valued.

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Answer #1

The Stock is Undervalued because it is $62.25 instead of $68.81 Option A

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