Problem:
Lily Co. is expected to pay a dividend of $5.25 on its common stock next year. The company's dividends are expected to grow at a constant rate of -0.8% indefinitely. The risk-free rate of return is 2% and the expected return on the market portfolio is 6%.
Requirement:
Question: If the stock of Lily Co. has a beta of 1.4, compute the current value per share of Lily Co. stock.
Note: Please provide reasons to support your answer.