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What is the current price of the stock for abc corporation

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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 .

Problem 1: What is the current price of the stock?

Reference no: EM132765105

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