Required rate=risk free rate+Beta*market risk premium
=5.2+(4.5*0.9)=9.25%
Required return=(D1/Current price)+Growth rate
0.0925=(2.5/50)+Growth rate
Growth rate=0.0925-(2.5/50)
=0.0425
P3=Current price(1+Growth rate)^3
=50*(1+0.0425)^3
=$56.65(Approx).
11. Problem 9.13 (Constant Growth) eBook . Problem Walk-Through You are considering an investment in Justus...
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