The last dividend paid to shareholders by AMP Limited was $0.23 per share. Assume that the board of directors of the company plans to maintain a constant dividend growth policy of 4.00 per cent. An investor, in evaluating an investment in the company, has determined that she would require a 17 per cent rate of return from this type of investment.
If the current price of AMP shares in the stock market is $5.22, should the investor purchase the shares?