(Nonconstant Growth Valuation)
A company currently pays a dividend of $2 per share (D0 = $2). It is
estimated that the company’s dividend will grow at a rate of 20% per
year for the next 2 years, then at a constant rate of 7% thereafter. The
company’s stock has a beta of 1.2, the risk-free rate is 7.5%, and the
market risk premium is 4%. What is your estimate of the stock’s current
price?
Click here for the solution: (Nonconstant Growth Valuation) A company currently pays a dividend of $2 per share (D0 = $2)
