You Are Considering Investing in ABC, Inc

Multiple Choice

You are considering investing in ABC, Inc.'s stock which is selling at $45.95. Similar stocks return 16%. ABC's last dividend ABC was $4.50 and a 6% constant growth rate is anticipated. Should you purchase ABC, Inc.?

A) No, because the stock is overpriced by $1.75.
B) No, because the stock is overpriced by $3.85.
C) Yes, because the stock is underpriced by $1.75.
D) Yes, because the stock is underpriced by $3.85.