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  3. 2. a friend recommends that you purchase stock in

2. A friend recommends that you purchase stock in HiTech Inc. because at a price...

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Accounting

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2. A friend recommends that you purchase stock in HiTech Inc. because at a price of $10, it is significantly undervalued in the market. Given the recommendation, you investigate for yourself you find that: Due to a high rate of earnings growth, HiTech Inc's dividends are expected to grow at a rate of 40% a year for the next 2 years and then level out to a permanent 10% a year. The stock has a beta of 1.75, the risk-free rate of return is 2%, and the expected return on the market is 12%. If HiTech Inc recently paid a dividend of $0.80, do you agree with your friend that it is undervalued

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