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Hi, can you guys help me with this exercise , step by step? I know the answer is 50, 53 however I need the steps
Hi, can you guys help me with this exercise , step by step? I know the answer is 50, 53 however I need the steps to get there.
8-5 Nonconstant Growth Valuation:
A company currently pays a dividend of $2 per share (D0 5 $2). It is esti- mated that the company's dividend will grow at a rate of 20% per year for the next 2 years, and then at a constant rate of 7% thereafter. The company's stock has a beta of 1.2, the risk-free rate is 7.5%, and the market risk premium is 4%. What is your estimate of the stock's current price?
thank you.
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