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Problem 7-05 

Nonconstant Growth Valuation

A company currently pays a dividend of

$4 per share (D0 = $4). It is estimated that the company's dividend will grow at a rate of 25% per year for the next 2 years, and then at a constant rate of 6% thereafter. The company's stock has a beta of 1.1, the risk-free rate is 5.5%, and the market risk premium is 4%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer to the nearest cent.

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