Question

The risk-free rate is 1.86% and the market risk premium is 7.72%. A stock with a β of 1.74 just paid a dividend of $2.78. The dividend is expected to grow at 22.07% for five years and then grow at 4.02% forever. What is the value of the stock?

Answer format: Currency: Round to: 2 decimal places.

Answer 1

		1.86%+7.72%*1.74
		15.29%
Year	Dividend	Terminal value	total cash flow	PVIF @ 15.29%	Present value
1	3.39		3.39	0.867357	2.94
2	4.14		4.14	0.752308	3.12
3	5.06		5.06	0.652535	3.30
4	6.17		6.17	0.565995	3.49
5	7.54	69.55	77.08	0.490931	37.84
					50.70
	Terminal value =		7.54*104.2%/(15.29%-4.2%)
			69.55
Price =					50.70
ans =					50.70