Detailed Explanation To Current Stock Price
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The Zumwalt Company is expected to pay a dividend of $2.25 per share at the end of the year, and that dividend is expected to grow at a constant rate of 5.00% per year in the future. The company's beta is 1.15, the market risk premium is 5.50%, and the risk-free rate is 4.00%. What is the current stock price?
a. $42.25
b. $43.31
c. $44.39
d. $45.50
e. $46.64
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Solution Summary
The solution explains how to calculate the current stock price using the dividend discount model.
Solution Preview
The current stock price is the present value of all dividends. Since the dividends grow at a constant ...
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