Crisp Cookware's common stock is expected to pay a dividend of $2.75 a share at the end
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Question:
Crisp Cookware's common stock is expected to pay a dividend of $2.75 a share at the end of this year (D1= $2.75); its beta is 0.7. The risk-free rate is 3% and the market risk premium is 6%. The dividend is expected to grow at some constant rate, gL, and the stock currently sells for $50 a share. Assuming the market is in equilibrium, what does the market believe will be the stock's price at the end of 3 years (i.e., what is P3)?
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