Question:
A company currently pays dividend of $2 per share, Do=$2. It is estimated that the company's dividend will grow at a rate of 20% per year for the next 2 years; then the dividend will grow at a constant rate of 7% thereafter. The company's stock has a beta equal 1.2, the risk-free is 7.5%, and the market premium is 4%.
Question:
What is your estimate of the stock's current price?