I=m Eating Restaurants is expected to pay a dividend of $5.00 per share on its common stock in one year. The dividend is expected to grow at 4% per year forever. Investors require a 12% rate of return...


I=m Eating Restaurants is expected to pay a dividend of $5.00 per share on its common
stock in one year. The dividend is expected to grow at 4% per year forever. Investors
require a 12% rate of return on stocks with I=m Eating=s risk characteristics.
a. What should be the current market price per share (i.e., the intrinsic value) of I=m
Eating=s stock?
b. If the actual market price per share is $60, is I=m Eating undervalued or
overvalued? How much is the stock mispriced?



Jun 05, 2022
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