Problem:
Stock Valuation using both CAPM and DDM. Bledsoe Corporation just paid a dividend of D0 = $0.75 per share and that dividend is expected to grow at a constant rate of g = 6.50% per year, beginning with the next dividend and continuing indefinitely. The company's beta is 1.25, the required return on the market is 10.50%, and the risk-free rate is 4.50%.
Required:
Question: What is the company's theoretical stock price?
Note: Show supporting computations in good form.