Raneem owns shares in HP Inc. Currently, the market price of the stock is $36.34. Management expects dividends to grow at a constant rate of 6 percent for the foreseeable future. Its last dividend was $3.25. Raneem’s required rate of return for such stocks is 16 percent. She wants to find out whether she should sell her shares or add to her holdings. a. What is the value of this stock? (1 Mark) b. Based on your answer above, should Raneem buy additional shares in HP inc.? Why or why not? (1 Mark)

Raneem owns shares in HP Inc. Currently, the market price of the stock is $36.34. Management expects dividends to grow at a constant rate of 6 percent for the foreseeable future. Its last dividend was $3.25. Raneem’s required rate of return for such stocks is 16 percent. She wants to find out whether she should sell her shares or add to her holdings.

a. What is the value of this stock? (1 Mark)

b. Based on your answer above, should Raneem buy additional shares in HP inc.? Why or why not? (1 Mark)