Current price under this new assumption of growth rate

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A company currently pays a dividend of $2.0 per share. It is estimated that the company's dividend will grow at a rate of 20% per year for the next 4 years, and that the dividend will grow at a constant rate of 7% thereafter. The company's stock has a beta of 1.5, the risk-free rate is 6%, and the market return is 12.5% a. What is your estimate of the company's stock price at the end of the year 4? b. What is your estimate of the company's stock price today? c. Now assume that the constant annual dividend growth rate after year 4 will be 0.0% (not 7%). All other info, as given above, is unchanged. What is your estimate of the company's current price (Po) under this new assumption of growth rate?

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Reference no: EM13870676

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