Reference no: EM132858666
Question - A financial analyst has been following "ABC" Corporation, a new unusual - growth company. According to his observations, he had the following information:
-He expects that the current risk-free rate is 6.25%,
-the market risk premium is 5 %, and that the.
-ABC Corporation beta is 1.75.
-The current earnings per share (EPS0) are $ 2.50.
-The analyst estimates that the company's dividends will grow at a rate of 25 % this year, 20 % next year, and 15 % the following year. After three years the dividend is expected to grow at a constant rate of 7 % a year.
-The company is expected to maintain its current payout policy, which mandated that divides should be equal to 40% of the value of the EPS.
Required - What is the current price of the stock?
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