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Hastings company

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Please help with the following problem. Provide step by step calculations.

Hastings company's current dividend is $2 per share (D0=$2). The dividend is expected to grow at a constant rate of 9 percent a year for the next 2 years (t=1 and t=2) and it will be 4 percent thereafter (from t=3 to t=infinity). The risk-free rate is 4 percent (kRF=4%), the required rate of return on the market portfolio is 6 percent (km=6%) and the company's beta equals to 1.5.

What is the price of the stock today (t=0)?

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Solution Summary

The following post help with a question about financial accounting and bookkeeping. This solution is comprised of a detailed explanation to calculate what is the price of Hastings stock today. Step by step calculations are given, along with explanations.

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Problem: Hastings company's current dividend is $2 per share (D0=$2). The dividend is expected to grow at a constant rate of 9 percent a year for the next 2 years (t=1 and t=2) and it will be 4 percent thereafter (from t=3 to t=infinity). The risk-free rate is 4 percent (kRF=4%), the required rate of ...

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