Let's assume that you're thinking about buying stock in West Coast Electronics. So far in your analysis, you've uncovered the following information: The stock pays annual dividends of $5.45 a share indefinitely. It trades at a P/E of 11.5 times earnings and has a beta of 1.15. In addition, you plan on using a risk-free rate of4.00%in the CAPM, along with a market return of 11%.You would like to hold the stock for 3 years, at the end of which time you think EPS will be $8.76 a share. Given that the stock currently trades at $76.02, use the IRR approach to find this security's expected return. Now use the dividend valuation model (with constant dividends) to put a price on this stock. Does this look like a good investment to you? Explain.

A. This security's expected return (IRR) is ____% (round to two decimals)

B. The value of the stock is $ ____ (nearest cent)

C. Using the dividend valuation model (with constant dividends), the value of the stock is $ ___ (Nearest cent)

D.

Does this look like a good investment to you? Explain. (Select the best choicebelow.)

A.

No, the stock looks like it would not make a good investment. It has a justified price that is below its current market price, and its expected return is lower than the required return.

B.

No, the stock looks like it would not make a good investment. It has a justified price that is above its current market price, and its expected return is higher than the required return.

C.

Yes, the stock looks like it would make a good investment. It has a justified price that is below its current market price, and its expected return is lower than the required return.

D.

Yes, the stock looks like it would make a good investment. It has a justified price that is above its current market price, and its expected return is higher than the required return.

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