Problem:
You are considering an investment in the common stock of Keler Corp. The stock is expected to pay a dividend of $2 per share at the end of the year (D1= $2.00). The stock has a beta equal to .9. The risk free rate is 5.6% and the market risk premium is 6 %. The stock's dividend is expected to grow at some constant rate g. The stock currently sells for $25 per share. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years? (What is P3?)