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McNally has yet to pay a dividend on it's common stock. However, the company expects to pay a $1.00 dividend starting 2 years from now (D2=$1.00). Thereafter, the stock's dividend is expected to grow at a constant rate of 5 percent a year. The stoc's beta is 1.4, the risk free rate is k(RF)= 0.06, and expected market return Km= 0.12.

a) What is the stock's expected price four years from now, i.e P4=?

b) What is stock's current price?

Please show the in details as I'm a beginner.

Reference no: EM131086480

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