Computing expected price of common stock

Reference no: EM1390628

You're considering an investment in the common stock of Crisp Cookware. The stock is expected to pay a dividend of $2 a share at the end of the year (D1 = $2.00). the stock has a beta equal to 0.9. The risk-free rate is 5.6% and the market risk premium is 6%. The stock's dividend is expected to grow at some constant rate g. The stock currently sells for $25 a share.

Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years? (That is, What is P3?)

Reference no: EM1390628

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