Question

A company currently pays a dividend of $2 per share
(D_{0} = $2). It is estimated that the company's dividend
will grow at a rate of 20% per year for the next 2 years, then at a
constant rate of 7% thereafter. The company's stock has a beta of
1.85, the risk-free rate is 6%, and the market risk premium is 4%.
What is your estimate of the stock's current price? Do not round
intermediate calculations. Round your answer to the nearest
cent.

Answer #1

Estimate of stock price is therefore $43.8

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