You expect Sharp Steel Company to pay a dividend of $2.37 per share next year. You expect
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Question:
You expect Sharp Steel Company to pay a dividend of $2.37 per share next year. You expect the dividend to grow 10% the following year, 7% the year after that, and then level off to a growth rate of 4% indefinitely. Sharp has a beta of 1.4, the risk-free rate of return is 1.1% and the market risk premium is 5.7%.
a) What is Sharp Steel's stock worth?
b) If Sharp's stock was currently trading for $62.10, would you buy it?
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