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Problem:

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 7 percent per year forever. The risk-free rate is 3.5 percent, the company's beta is 1.45, and the market risk premium is 5 percent. The required rate of return on the company's stock is expected to remain constant.

Requirement:

Question: What is the current stock price?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91173277

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