3. A firm's common stock is currently selling for $50 per share. Its dividend payments...
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3. A firm's common stock is currently selling for $50 per share. Its dividend payments and end of year stock prices, in each of the past 6 years are shown in the following table: (10 Marks) Year Dividends 2020 2019 2018 2017 2016 2015 $4.60 4.20 3.80 3.40 3.10 2.85 Year end Stock Price 47.5 45.6 13.1 44.1 39.1 30.1 To help you analyze better, additional information is also collected which are as follows: Current Yields on 3-month U.S. Treasuries is 3.59% Return on market portfolio is estimated around 8% Beta coefficient is estimated to be 1.25 The dividends are expected to grow at a constant rate. Is this stock overvalued or undervalued? Support your answer with relevant calculations and arguments
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