A Firm Has a Current Price of $40 a Share

Multiple Choice

A firm has a current price of $40 a share, an expected growth rate of 11 percent and expected dividend per share (D1) of $2. Given its risk, you have a required rate of return for it of 12 percent. Assuming that you expect the stock price to increase to $42 during the investment period, your expected rate of return and decision would be

A) 10 percent - do not buy
B) 12 percent - do not buy
C) 14 percent - buy
D) 16 percent - buy
E) 18 percent - buy