The current market prices of stocks A and B are $20 and $30 respectively. Stock A is expected to pay a dividend of $2 per share and stock B does not pay dividends. Yahoo Finance estimates a one-year price target of $25 for A and $33 for B. The beta of A is 3.0 while the beta of B is 1.5. The 10-year Treasury bond yields 3%. The market risk premium is 6%. Given the above information
a) both stocks are undervalued.
b) stock A is undervalued and B is overvalued.
c) stock A is overvalued and B is undervalued.
d) both stocks are overvalued.