=+LG 4 LG 6 P7–22 Integrative: Risk and valuation The Best Equipment Company just released a successful new and innovative product. It is expected that the product will bring huge profits to the company, and its dividend will grow at 7% every year from now on.

The last annual dividend of the company was $0.50 per share. The current risk-free rate of return is 5%, and you require a 6% risk premium to hold the stock. How much will you pay for a share of the stock? Assume that the share price is $50.