A company currently pays a dividend of $4 per share (D0= $4). It is estimated that...

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A company currently pays a dividend of $4 per share (D0= $4). Itis estimated that the companyâ€™s dividend will grow at a rate of 10%per year for the next 2 years, and then at a constant rate of 5%thereafter. The companyâ€™s stock has a beta of 1.6, the risk-freerate is 4% and the market risk premium is 2%. What is your estimateof the stockâ€™s current price?

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Dt1 Dt1g1 D0 4 For the first two years g1 01 D1 411 D1 44 D2 4411 D2 484 Find the price of the stock in year 3 g2 005 D3 484105 D3 5082 D4 5082105 D4 53361 See Answer

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