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Estimating current price of a stock

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The Isberg Company just paid a dividend of $0.80 per share, and that dividend is expected to grow at a constant rate of 6.00% per year in the future. The company's beta is 1.25, the market risk premium is 5.00%, and the risk-free rate is 4.00%. What is the company's current stock price?

$19.95
$20.45
$20.96
$21.49
$22.02

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Solution Summary

Solution describes the steps to estimate the current price of given stock.

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Current Dividend=Do=$0.80
Constant growth rate=g=6%
Dividend at the end of year ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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