Problem:
The XYZ Company just paid a dividend of D0 = $1.25 per share, and that dividend is expected to grow at a constant rate of 5.00% for the first 2 years and then 3% per year from year 3 till forever. The company's beta is 1.2, the expected market return is 9.5%, and the risk-free rate is 4.00%.
Required:
Question: What is the company's current stock price?
Note: Please provide equation and explain comprehensively and give step by step solution.