Tennessee Vols Inc. currently (2024) does not pay a dividend. However, the company is expected to...

 

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Tennessee Vols Inc. currently (2024) does not pay a dividend. However, the company is expected to pay a $1.00 dividend two years from today (2026). The dividend is then expected to grow at a rate of 20% a year for the following three years. After the dividend is paid in 2029, it is expected to grow forever at a constant rate of 7%. Currently, the risk-free rate is 6%, market risk premium (rM -TRF) is 5%, and the stock's beta is 1.4. What should be the price of the stock today? Tennessee Vols Inc. currently (2024) does not pay a dividend. However, the company is expected to pay a $1.00 dividend two years from today (2026). The dividend is then expected to grow at a rate of 20% a year for the following three years. After the dividend is paid in 2029, it is expected to grow forever at a constant rate of 7%. Currently, the risk-free rate is 6%, market risk premium (rM -TRF) is 5%, and the stock's beta is 1.4. What should be the price of the stock today?

Answer rating: 100% (QA)

Lets calculate each term step by step 1 P0 1001 0132 P0 1001132 10012769 approx 07837 ... View the full answer