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Nonconstant growth valuation

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Nonconstant Growth Valuation

Problem: A company currently pays a dividend of $2 per share (D0 = $2). It is estimated that the company's dividend will grow at a rate of 20% per year for the next 2 years, and then at a constant rate of 8% thereafter. The company's stock has a beta of 1.85, the risk-free rate is 6.5%, and the market risk premium is 3%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer to the nearest cent. Please explain your answer ASAP.

Reference no: EM132419770

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