You plan to invest in the common stock of Keller Corporation. It is estimated that they will pay a dividend of $2 each at the end of the year (D₁ = $2.00). Its beta is 0.9, the risk-free rate is 5.6% and the market risk premium is 6%. Dividends are expected to increase at a constant rate g. Today the shares sell for $25 each. Assuming the market is in equilibrium, how much does the market think they will be worth after 3 years? (In other words, what is P?)

Answer rating: 100% (QA)

Given the information provided we can use the Gordon Growth Model to estimate the expected price of Keller Corporations stock in three years The Gordo... View the full answer