A stock just paid a dividend of D0 = $2.50. It is expecting supernormal growth at 30 percent per year for the next 2 years followed by constant growth of 4.5 percent. The required rate of return is rs = 15.5% What is the current stock price?
ParticularsCost of equity (Ke)Growth Rate (g) Amount15.50%4.50% Current Dividend (D0)Dividend-1 (D0 x (1.30)^1)Dividend-2 (D0 x (1.30)^2)Dividend-3 (D0 x (1.30)^2 x (1.045))Price at year 2…
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