IN A RECENT PERIOD JOSHUA INC. REPORTED EARNINGS PER SHARE (EPS) O...

12. In a recent period Joshua Inc. reported earnings per share (EPS) of $4 and following its policy just paid a dividend based on a payout ratio of 50%. The company’s share price and dividends have grown at an average of 5% per year, and there is no reason to expect that this will change in the future. You want to buy Joshua stock and have determined that the market expected return for this type of stocks is 16%. If Joshua stock was trading at $18.45 on the market, you would likely A) not buy the stock because the fair value is $ 17.27 B) not buy the stock because the fair value is $18.18 C) buy the stock because the fair value is $19.09 D) buy the stock because the fair value is $36.36 E) buy the stock because the fair value is $66.67