Problem:
A share of common stock has just paid a dividend of $2.00. The market return is 15% and the beta is 2. The three month T-bill rate is 5%. The expected long-run growth rate for this stock is 15 percent.
Required:
Question 1: What is the required return for the stock?
Question 2: What is the price of the stock?
Note: Please provide reasons to support your answer.