Church Inc.is presently enjoying relatively high growth because of a surge in the demand for its new product.Management expects earnings and dividends to grow at a rate of 22% for the next 4 years,after which competition will probably reduce the growth rate in earnings and dividends to zero,i.e. ,g = 0.The company's last dividend,D0,was $1.25,its beta is 1.20,the market risk premium is 5.50%,and the risk-free rate is 3.00%.What is the current price of the common stock? Do not round intermediate calculations.
A) $26.57
B) $32.69
C) $28.97
D) $23.39
E) $27.37
Correct Answer:
Verified
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