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Category > Business & Finance Posted 06 Aug 2017 My Price 9.00

A stock is not expected to pay

A stock is not expected to pay a dividend over the next four years. Five years from now, the company anticipates that it will establish a dividend of $1.00 per share (i.e., D5 = $1.00). Once the dividend is established, the market expects that the dividend will grow at a constant rate of 5% per year forever. The risk-free rate is 5%, the company's beta is 1.2, and the market risk premium is 5%. The required rate of return on the company's stock is expected to remain constant. What is the current stock price?

  1. $ 7.36
  2. $ 8.62
  3. $ 9.89
  4. $10.98
  5. $11.53

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Homework Helper
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Status NEW Posted 06 Aug 2017 07:08 PM My Price 9.00

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