Computation of current price of stock

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Computation of current price of stock

The Cumins Engine Company common stock has a beta of .9. The current risk-free rate of return is 5% and the market risk premium is 8%.The COE of the company is quoted in a press release as saying that the firm will pay a dividend of \$.80 per share in the coming year and expects the dividends to grow at a rate of 7% for the foreseeable future. Using the constant growth model, what value would you assign to this stock?

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