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A company currently pays a dividend of $2.2 per share (D0 = $2.2). It is estimated...

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Finance

A company currently pays a dividend of $2.2 per share(D0 = $2.2). It is estimated that the company's dividendwill grow at a rate of 25% per year for the next 2 years, and thenat a constant rate of 5% thereafter. The company's stock has a betaof 1.5, the risk-free rate is 8%, and the market risk premium is3%. What is your estimate of the stock's current price? Do notround intermediate calculations. Round your answer to the nearestcent.

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Step 1 Calculation of cost of equity using CapitalAsset Pricing ModelUsing Capital Asset Pricing ModelCost of Equity Ke Rf b Rm Rf WhereRf Risk    See Answer
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A company currently pays a dividend of $2.2 per share(D0 = $2.2). It is estimated that the company's dividendwill grow at a rate of 25% per year for the next 2 years, and thenat a constant rate of 5% thereafter. The company's stock has a betaof 1.5, the risk-free rate is 8%, and the market risk premium is3%. What is your estimate of the stock's current price? Do notround intermediate calculations. Round your answer to the nearestcent.

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