Graham Enterprises anticipates that its dividend at the end of the year will be $2.00 a share (D1) The dividend is expected to grow at a constant rate of 7 percent a year. The risk-free rate is 6 percent, the market rate is 5 percent, and the company's beta equals 1.2 What is the expected price of the stock 5 years from now?
By By CAPM, Required rate of return is
Rr = Rf + Beta * market premium = 6% ...
A calculation for the expected stock price for Graham Enterprises.