The risk-free rate is 8% and the expected return on the market is 14%. As an analyst,
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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 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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