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Posted on October 20, 2016

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% percent per year for the next 2 years, then the dividend will grow at a constant rate of 7% thereafter. The company’s stock has a beta equal to 1.2 the risk-free rate is 7.5 percent, and the market risk premium is 4 percent. What is your estimate is the stock’s current price? SHOW WORK AND EXPLAIN ANSWER

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