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Assume the risk-free rate is 4% (rf = 4%) and the market risk premium is...

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Finance

Assume the risk-free rate is 4% (rf = 4%) and the market risk premium is 4% (E[rM]- rf = 4%). A stock with a beta of 1.5 and an expected perpetual growth rate of 5% has a current dividend of $1 (D0 = 1). If the CAPM holds and the stock is fairly priced, what is the expected stock price in 1 year (P1)?

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