Nonconstant Growth Valuation
A company currently pays a dividend of $3.15 per share (D0 = $3.15). It is estimated that the company's dividend will grow at a rate of 23.5% per year for the next 2 years, then at a constant rate of 6.45% thereafter. The company's stock has a beta of 1.85, the risk-free rate is 6.00%, and the market risk premium is 9.00%. What is your estimate of the stock's current price?
$26.81
$33.10
$27.35
$24.89
or
$22.70