You are considering an investment in the common stock of Crisp’s Cookware. The stock is expected to pay a dividend of $2 a share at the end of the year (D(1) = $2.00). The stock has a beta equal of 0.9. The risk free rate of 5.6% and the market risk premium is 6%. The stock’s dividend is expected to grow at some constant rate g. The stock currently sells for $25 a share. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years? (That is, what is P(3)?)
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