Compute the sustainable growth rate

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Reference no: EM1352039

Faulk Corp is going through a period of growth. The company just paid a dividend of $1.50 per share and expects dividends to grow at a 22% rate for the next 7 years and then level off to a constant rate thereafter. The beta of stock is 1.4, the risk free rate of return is 5%, and the expected return on the market is 11%. The company has net income of $2.50 per share, and a return on equity of 14%.

Given the information provided above, compute the sustainable growth rate, the required rate of return for Faulk Corporation's stock and the current price for this stock?

Reference no: EM1352039

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