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  1. business
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  3. an investor with a required return of 14 percent f

An investor with a required return of 14 percent for very risky investments in common...

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Accounting

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An investor with a required return of 14 percent for very risky investments in common stock has analyzed three firms and must decide which, Wany, to purchase. The information is as follows: Firm A B Current earnings $2.40 $3,20 $6,50 Current dividend $1.50 $4.20 $7.30 Expected annual growth rate in 6% 49 -390 dividends and earnings Current market price $ 23 $50 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: 5 Stock B: 5 Stock C: b. If the investor does buy stock A, what is the implied percentage return? Round your answer to two decimal places c. If the appropriate P/E ratio is 17, what is the maximum price the investor should pay for each stock? Hound your answers to the nearest cont. Stock A: Stock B: 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 omt Stock As Stock B: 5 Stock C: 5

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