Question: Nonconstant Growth Valuation
A company currently pays a dividend of $2.25 per share (D0 = $2.25). It is estimated that the company's dividend will grow at a rate of 15% per year for the next 2 years, then at a constant rate of 7% thereafter. The company's stock has a beta of 0.95, the risk-free rate is 3.5%, and the market risk premium is 4%. What is your estimate of the stock's current price? Round your answer to the nearest cent.