Answer:
current stock price, = $26.84
Explanation:
Given,
Most recent dividend, = $1.50
Growth rate, = 15% = 0.15 (Next 2 years)
= 5% = 0.05 (remain constant after 2 years)
required rate of return , = 12% = 0.12
We know,
Current stock price, = [ ÷ (1 + )] +
or, = [{ × (1 + )} ÷ (1 + )] +
or, = [{$1.50 × (1 + 0.15)} ÷ (1 + 0.12)] +
or, = ($1.725 ÷ 1.12) +
or, = $1.5402 + [(1.98375 + 29.75625) ÷ 1.2544]
or, = $1.5402 + (31.74 ÷ 1.2544)
or, = $1.5402 + 25.3029
Therefore, current stock price, = $26.84