Question
You are considering the purchase of a stock that just paid a dividend of $5.00 per share. You expect this stock to have a growth
You are considering the purchase of a stock that just paid a dividend of $5.00 per share.
You expect this stock to have a growth rate of 20 percent for the next 2 years, and a long-run normal growth rate of 8 percent thereafter.The risk free- rate is 2 percent, the return on the market is 10 percent, and the company has a beta of 1.5.What is the maximum price you are willing to pay for this stock?
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Corporate Finance
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Gordon Roberts, Hamdi Driss
8th Canadian Edition
01259270114, 9781259270116
