A company currently pays a dividend of $1.6 per share (D0 = $1.6). It is estimated that the company's dividend will grow at a rate of 23% per year for the next 2 years, and then at a constant rate of 5% thereafter. The company's stock has a beta of 1.8, the risk-free rate is 8.5%, and the market risk premium is 4.5%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer to the nearest cent.

A company currently pays a dividend of $1.6 per share (D0 = $1.6). It is estimated that the company's dividend will grow at a rate of 23% per year for the next 2 years, and then at a constant rate of 5% thereafter. The company's stock has a beta of 1.8, the risk-free rate is 8.5%, and the market risk premium is 4.5%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer to the nearest cent.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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