8-16 (Common stock valuation)

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FINANCE

8-12 (Common stock valuation) The common stock of NCP paid $1.32 in dividends last year. Dividends are expected to grow at an 8 percent annual rate for an indefinite number of years.

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

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

c. Should you make the investment?

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