Question: Lifecycle Motorcycle Company is expected to pay a dividend in year 1 of $2.00, a dividend in year 2 of $3.00, and a dividend in

Lifecycle Motorcycle Company is expected to pay a dividend in year

Lifecycle Motorcycle Company is expected to pay a dividend in year 1 of $2.00, a dividend in year 2 of $3.00, and a dividend in year 3 of $4.00. After year 3, dividends are expected to grow at the rate of 7% per year. The expected market return is 12%, the risk- free rate is 6%. The stock has beta of 1.0. The current market price of the stock in the market is $70. The company is using the multistage DDM to estimate the intrinsic value. Determine whether the stock is undervalued or overvalued. (7 points)

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