(4) Harry Davis’s common stock is currently selling at $50 per share. Its last dividend (D0)

was $3.12, and dividends are expected to grow at a constant rate of 5.8% in the foreseeable future. Harry Davis’s beta is 1.2, the yield on T-bonds is 5.6%, and the market risk premium is estimated to be 6%. For the over-own-bond-yield-plus-judgmentalrisk-

premium approach, the firm uses a 3.2% risk premium.