Melissa Popp is thinking about buying some shares of R.H. Lawncare Equipment, at $48 per share. She expects the price of the stock to rise to $60 over the next 3 years. During that time she also expects to receive annual dividends of $4 per share.
A. What is the intrinsic worth of this stock, given a 12% required rate of return?
B. What is its expected return?
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