Problem:
Thompson Hauling Co. anticipates dividend growth rates of 25%, 15% and 10% over the next three years, and a 6% long-term growth rate beyond that. Its current dividend is $1.80 per share. Thompson has a beta of 1.1, the market risk premium is 7 percent and the risk-free rate is 4.5 percent.
Required:
Question: What is the current price of Thompson?
- $48.66
- $40.53
- $42.80
- $30.77
Note: Provide support for your underlying principle.