Problem 8-5 Nonconstant Growth Valuation

A company currently pays a dividend of $2.5 per share (D₀ = $2.5). It is estimated that the company's dividend will grow at a rate of 15% per year for the next 2 years, and then at a constant rate of 5% thereafter. The company's stock has a beta of 1.6, the risk-free rate is 8%, and the market risk premium is 3%. What is your estimate of the stock's current price? Round your answer to the nearest cent.

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