You are interested in purchasing the common stock of Inch, Inc., which is currently priced at $ 40. The company is expected to pay a dividend of $3 next year and to grow at a constant rate of 8 percent. a. What should the market value of the stock be if the required rate of return is 15.75 percent? (0.5 Mark) b. Is this a good buy? Why or why not? (0.5 Mark)

You are interested in purchasing the common stock of Inch, Inc., which is currently priced at $ 40. The company is expected to pay a dividend of $3 next year and to grow at a constant rate of 8 percent.

a. What should the market value of the stock be if the required rate of return is 15.75 percent? (0.5 Mark)

b. Is this a good buy? Why or why not? (0.5 Mark)