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Calculate the expected stock price in two-years

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Reference no: EM132861512

A firm will begin paying a dividend of $2 in 1 year. It plans on growing the dividend by 12% for 2 years than at 8% for the next 2 years and then at a constant rate of 3%. The 10-year treasury is selling to yield 2%, the stock beta is 1.1 and the market risk premium is 7%

Question 1: Calculate the expected stock price in 2-years

Question 2: Calculate the fair value of the stock today.

Question 3: The stock is currently trading at $40. Is the stock priced correctly, over, or underpriced? Explain

Reference no: EM132861512

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