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Calculate the stock price of the firm

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ABC Corporation expects to pay dividend of $1.00 next year. The corporation forecasts that the dividend will grow 10% in year 2, 20% in year 3, -10% in year 4, and 15% in year 5, and after that at 3% constant rate. The risk free is now 3.50%, the rate of return on the market is 7.50%. The corporations beta is 0.75.

a. Calculate required rate of return of ABC Corporation.

b. Calculate the stock price of the firm.

Reference no: EM133075083

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