Problem:
A company currently pays a dividend of $1.25 per share (D0 = $1.25). It is estimated that the company's dividend will grow at a rate of 21% per year for the next 2 years, then at a constant rate of 6% thereafter. The company's stock has a beta of 1.15, the risk-free rate is 5%, and the market risk premium is 4%.
Required:
Question: What is your estimate of the stock's current price?
Note: Please provide step by step solution.