QUESTIONS 79 THROUGH 90 RELATE TO EQUITY INVESTMENTS

82. An analyst gathers the following data to determine the attractiveness of the

company’s common stock:

Dividends per share in 2002 $2

Dividends per share in 2008 $3

Expected return on the market 17%

Expected nominal risk-free return 9%

Stock’s beta 1.8

Stock’s market price as of 1 January 2009 $19

Using the constant growth dividend discount model, the stock’s intrinsic value is

closest to:

A. $12.82.

B. $18.29.

C. $19.57.