Question
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
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 riskfree
rate is 7.5%, and the market risk premium is 4%. What is your estimate of the
stock's current price?
problem is related to stocks and market equilibrium
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Valuation Measuring and managing the values of companies
Authors: Mckinsey, Tim Koller, Marc Goedhart, David Wessel
5th edition
978-0470424650, 9780470889930, 470424656, 470889934, 978-047042470
