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Joseph Moore is interested in purchasing the common stock of Carla Vista, Inc., which is currently priced at $34.51. The comp

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Answer #1

Ans a) Market Value of the stock is $ 33.51

P0 = Price of Share
D1 = Current Dividend
Ke = Cost of Equity
g = growth rate
P0 = D1 / (Ke - g)
P0 = 2.58 / (14%- 6.30%)
P0 = 33.51

Ans b) It is not good to buy the stock at $ 34.51 since market value of stock is less than the price of the stock.

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