You are thinking about investing in stock in a company which paid a dividend of $10 this

Question:

You are thinking about investing in stock in a company which paid a dividend of $10 this year and whose dividends you expect to grow at 4 percent a year. The risk free rate is 3 percent and you require a risk premium of 5 percent. If the price of the stock in the market is $200 a share, should you buy it?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...