Common stock valuation problem the fast-growth company, Ask an Expert

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COMMON STOCK VALUATION PROBLEM The Fast-Growth Company recently paid a dividend of $3.20 per share. Analysts expect the dividend to grow at the rate of 28% per year for 3 years, then by 16% for 3 more years, before converging to the industry median growth rate of 7%. The firm’s beta has been estimated at 1.15 by Value-Line analysts. If treasury securities are currently yielding 5.5% and the average return on the market portfolio is expected to be 12.5%, what is the most you should be willing to pay for a share of this common stock?

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Category:- Financial Management
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