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    Expected Stock Price

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    Yohe Technology's stock is expected to pay a dividend of $2.00 a share at the end of the year. The stock currently has a price of $40 a share, and the stock's dividend is expected to grow at a constant rate of g percent a year. The stock has a beta of 1.2. The market risk premium, kM - kRF, is 7 percent and the risk-free rate is 5 percent. What is the expected price of Yohe's stock 5 years from today?

    A. $51.05
    B. $55.23
    C. $59.87
    D. $64.90
    E. $66.15

    © BrainMass Inc. brainmass.com October 9, 2019, 8:34 pm ad1c9bdddf
    https://brainmass.com/business/accounting-for-corporations/expected-stock-price-155404

    Solution Preview

    We first find the growth rate
    Using the constant growth model
    Cost of equity ...

    Solution Summary

    The solution explains how to calculate the expected stock price in 5 years.

    $2.19