Better Mousetraps has come out with an improved product, and the world is beating a path to its door. As a result, the firm projects growth of 20% per year for 3 years. By then, other firms will have copycat technology, competition will drive down profit margins, and the growth rate will fall to 4% thereafter. The next dividend is expected to be $1.00 per share, what is the price of the firm’s stock today? Assume the stock has a beta of 1.2, the market risk premium is 8% and the risk free rate is 2%.
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$20.49
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None of these is correct
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$25.19 |
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$28.55
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$30.17
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