# Estimate current price of stock with growing dividends

7-5

A company currently pays a dividend of $2 per share. It is estimated that the company's dividend will grow at a rate of 20% for the next two years, then the dividend will grow at a constant rate of 7% thereafter. The company's stock has a beta equal to 1.2, the risk free rate is 7.5% and the market risk premium is 4%. What would you estimated the stock's current price?

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A company currently pays a dividend of $2 per share. It is estimated that the company's dividend will grow at a rate of 20% for the next two years, then the dividend will grow at a constant rate of 7% thereafter. The company's stock has a beta equal to 1.2, the risk free rate is 7.5% and ...

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This solution is comprised of a detailed explanation to calculate the stock's current price.