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  1. business
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  3. an investor with a required return of 11 percent f

An investor with a required return of 11 percent for very risky investments in common...

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Accounting

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An investor with a required return of 11 percent for very risky investments in common stock has analyzed three firms and must decide which, if any, to purchase. The information is as follows: Stock B: $ Firm Current earnings Current dividend Stock B: $ Expected annual growth rate in dividends and earnings Current market price % A B C $3.40 $7.40 $2.30 $1.40 $3.20 $6.00 $26 $53 $ 55 a. What is the maximum price that the investor should pay for each stock based on the dividend-growth model? Round your answers to the nearest cent. Stock A: $ Stock B: $ Stock C: $ 5% 4% Stock C: $: b. If the investor does buy stock A, what is the implied percentage return? Round your answer to two decimal places. -1% c. If the appropriate P/E ratio is 17, what is the maximum price the investor should pay for each stock? Round your answers to the nearest cent. Stock A: $ Stock C: $ If the appropriate P/E ratio is 5, what is the maximum price the investor should pay for each stock? Round your answers to the nearest cent. Stock A: $

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