Find the current price of the stock

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Reference no: EM132811093

Problem 1: A company just paid an annual dividend of Rs.2. The dividend is expected to grow 30% per year for the next two years and at a more sustainable growth rate thereafter. Two years later the expected sales of the company are likely to be Rs.100 million and a net profit of Rs.10 million. The total Debt of the company is expected to be Rs.30 million and Total Equity of Rs.10 million. The Company is likely to maintain a dividend pay-out ratio of 30% after 2 years and that is likely to continue forever. Find the current price of the stock which has a beta of 1.2. The risk-free rate is 6% and the market risk premium is 6%.

Reference no: EM132811093

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