1- A number of publicly traded firms pay no dividends yet investors are willing to buy shares in these firms.

1- A number of publicly traded firms pay no dividends yet investors are willing to buy
shares in these firms. How is this possible? Does this violate our basic principle of stock
valuation? Explain your answer.

2- The risk free rate of return is 8 percent; the expected rate of return on the market is 12
percent. Stock X has a beta coefficient of 1.3, an earnings and dividend growth rate of 7
percent, and a current dividend of RM2.40. If the stock is selling for RM35, what should
you do?
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