Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. a company currently pays a dividend of $2.2 per sh

A company currently pays a dividend of $2.2 per share (D0 = $2.2). It is estimated...

80.2K

Verified Solution

Question

Finance

A company currently pays a dividend of $2.2 per share(D0 = $2.2). It is estimated that the company's dividendwill grow at a rate of 25% per year for the next 2 years, and thenat a constant rate of 5% thereafter. The company's stock has a betaof 1.5, the risk-free rate is 8%, and the market risk premium is3%. What is your estimate of the stock's current price? Do notround intermediate calculations. Round your answer to the nearestcent.

Answer & Explanation Solved by verified expert
4.1 Ratings (735 Votes)
Step 1 Calculation of cost of equity using CapitalAsset Pricing ModelUsing Capital Asset Pricing ModelCost of Equity Ke Rf b Rm Rf WhereRf Risk    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

A company currently pays a dividend of $2.2 per share(D0 = $2.2). It is estimated that the company's dividendwill grow at a rate of 25% per year for the next 2 years, and thenat a constant rate of 5% thereafter. The company's stock has a betaof 1.5, the risk-free rate is 8%, and the market risk premium is3%. What is your estimate of the stock's current price? Do notround intermediate calculations. Round your answer to the nearestcent.

Other questions asked by students

Q

ork Part II the slope if it exists of the line contai 12 15 and...

Basic Math
Q

The workers effectively shut down UPS during the strike. Without the workers, UPS simply could not...

Psychology
Q

What maximum temperature might be expected at the bottom of a well drilled within a relatively...

Mechanical Engineering
Q

Find two countries that are high in world energy consumption and two that are significantly...

Biology
Q

K Graph the solution set of the ine X 8 3

Basic Math
Q

Let A be an n x n square matrix with entries in C. Suppose A...

Algebra
Q

On January 1, 2021, Universe of Fun issues $720,000, 9% bonds that mature in 15...

Accounting
Q

Required information [The following information applies to the questions displayed below]...

Accounting
Q

On March 1, ABX Company's assets are $100,000 and its liabilities are $30,000. On March...

Accounting
Q

Taxes =$18,500 Interest expense =$37,500 Depreciation expense =$61,800 Earnings before interest and taxes =$269,400 Calculate...

Accounting
Q

Shenandoah Sportswear, Inc. has the following information about units and costs: Using the high-low method,...

Accounting
Q

Question: 1.Do you think the lender would have any concerns with WCC keeping the same...

Finance