Question
Better Mousetraps has come out with an improved product, and the world is beating a path to its door. As a result, the firm projects
Better Mousetraps has come out with an improved product, and the world is beating a path to its door. As a result, the firm projects growth of 20% per year for 3 years. By then, other firms will have copycat technology, competition will drive down profit margins, and the growth rate will fall to 4% thereafter. The next dividend is expected to be $1.00 per share, what is the price of the firms stock today? Assume the stock has a beta of 1.2, the market risk premium is 8% and the risk free rate is 2%.
$25.19 | ||
None of these is correct
| ||
$20.49
| ||
$28.55
| ||
$30.17 |
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