Calculate the required return by the market for smile white

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Reference no: EM132063761

In year 2008, Janet's firm is using a two stage dividend growth model to find the intrinsic value of Smile White Co.

Let the risk free interest rate is 4.5% and expected return of market is 14.5% and beta of the Smile White Co. is 1.15. In 2008, dividend per share is $1.72 for the company.

Dividends are expected to grow at a rate of 12% per year for the next three years till 2011.

After 2011 dividend growth rate will be at constant rate 9% per year indefinitely. Calculate the required return by the market for Smile White Co. stock.

Reference no: EM132063761

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