According to the Value Line Investment Survey, the growth rate in dividends for IBM for the next years is expected to be 19 percent. Suppose IBM meets this growth rate in dividends for the next five years and then the dividend growth rate falls to 5 percent indefinitely. Assume investors required an 11 percent return on IBM stock. Is the stock priced correctly? What factors could affect youranswer?

Transcribed Image Text:

52-Week Price 28.84 acledeGrp 1.42 3.9 DukeEngy 1.28 37.51 32. 12 26.09 94.05 72.73BM 1.20 82.49 33.35 16 17 16 15 36.64 31.61 91.52 79.60 ク? 0.58 0.39 0.17 1.53 0.38 4.0 1.3 52.64 PenneyJC 72 26.22 TootsieRoll 32 1.0