### Nonconstant growth valuation

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##### Reference no: EM132235123

Nonconstant Growth Valuation:

A company currently pays a dividend of \$2 per share (D0 5 \$2). It is esti- mated that the company's dividend will grow at a rate of 20% per year for the next 2 years, and then at a constant rate of 7% thereafter. The company's stock has a beta of 1.2, the risk-free rate is 7.5%, and the market risk premium is 4%. What is your estimate of the stock's current price?

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