Question: The risk-free rate is 8% and the expected return on the market is 14%. As an analyst, you are preparing a recommendation report on the

The risk-free rate is 8% and the expected return on the market is 14%. As an analyst, you are preparing a recommendation report on the following two stocks:

StockSStock B

Beta0.851.35

Expected dividend nextyear$1.10$4.00

Growth rate(g)8%6%

Current Price(p0)$22$30.77

Would you recommend to buy or sell the stocks? Explain.
At what prices will you change your decision from either "buy" or "sell" to "hold"?

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