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Nonconstant Dividend Growth Valuation A company currently pays a dividend of $3.6 per share (D0 =...

Nonconstant Dividend Growth Valuation A company currently pays a dividend of $3.6 per share (D0 = $3.6). It is estimated that the company's dividend will grow at a rate of 15% per year for the next 2 years, and then at a constant rate of 7% thereafter. The company's stock has a beta of 1.2, the risk-free rate is 7.5%, and the market risk premium is 3.5%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer to the nearest cent. $

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Answer #1

First we need to calculate the required return on equity:

r = return

Now we can caluclate the price by solving the below equation:

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