Question 14 5 pts Kelso Corporation lus Dald a dividend of D

Question 14 5 pts Kelso Corporation lus Dald a dividend of Do-$1.40 per share, and that dividend is expected to grow at a constant rate of 6.50% per year in the future. The company\'s beta is 1.70, the required return on the market is 10.50%, and the risk-free rate is 4.50%. What is the company\'s current stock price? Your answer should be between 8.22 and 37.40, rounded to 2 decimal places, with no special characters

Solution

required return= risk-free rate +Beta*(MArket rate- risk-free rate )

=4.5+1.7*(10.5-4.5)

=14.7%

Current price=D1/(Required return-Growth rate)

=(1.4*1.065)/(0.147-0.065)

which is equal to

=$18.18(Approx).