4. Church Inc. is presently enjoying relatively high growth because of a surge in the demand for its new product. Management expects earnings and dividends to grow at a rate of 25% for the next 4 years, after which competition will probably reduce the growth rate in earnings and dividends to zero, i.e., g = 0. The company’s last dividend, D0, was $1.25, its beta is 1.20, the market risk premium is 5.50%, and the risk-free rate is 3.00%. What is the current price of the common stock?
a. $26.77
b. $27.89
c. $29.05
d. $30.21
e. $31.42
1
Expert's answer
2012-01-27T08:27:12-0500
a. $26.77 Pa = d0*(1+g/100)*100/(k - g) = 1,25*(1+25/100)*100/6 = 26.77
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Apache Paint
31.08.12, 01:25
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03.07.12, 16:09
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Thank you for help
Dear Joseph Questions in this section are answered for free.& If you have some short homework questions, minor tasks, etc. You can try it yourself and post your own questions. Enjoy!
This is fantastic. How much does it cost? I will like to contribute on this effort if the answer is correct.
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