Problem:
You are considering an investment in the common stock of Crisp's Cookware. The stock is expected to pay a dividend of $2 a share at the end of the year (D1=$2.00).The stock has a beta equal to 0.9. The risk-free rate is 5.6%, and the market risk premium is 6%. The stock's dividend is expected to grow at some constant rate g. The stock currently sells for $25 a share. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years? (that is, what is P3?)
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