Plans on returning its dividend to pre-recession levels

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Recreational Pharmaceuticals Inc. plans on returning its dividend to pre-recession levels of $1.60 a share next year, which you expect to grow at 12% for the three years after that, 8% for two years after that, and 4% thereafter. Assume the market risk premium is 9.5%, beta is 1.25 and use the 10-year Treasury note as the risk-free rate (use 2.34%). Assuming the stock is currently selling for $27.39 a share, how could you profit, assuming your valuation is right, based on the current price? Explain

Reference no: EM131875613

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