Consider the one-period valuation model for computing stock prices. Suppose you are considering buying Wal-Mart stock, which has a price of $75.06 and a dividend of $1.88 per share, and then selling the stock one year from now. If your required return on investment is 15% and the stock is expected to be selling for $77 next year, what do you value the stock at and should you buy it?
A) The stock is valued at $68.59 and I would want to buy it.
B) The stock is valued at $68.59 and I would not want to buy it.
C) The stock is valued at $525.87 and I would not want to buy it.
D) The stock is valued at $75.06 and since it will sell for $77, I would want to buy it.