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Question
Motor Homes Inc. (MHI) is presently in a stage of abnormally high growth because of a surge in the demand for motor homes. The company expects earnings and dividends to grow at a rate of 20 percent for the next 4 years, after which time there will be no growth (g = 0) in earnings and dividends. The company's last dividend was $1.50. MHI has a beta of 1.6, the return on the market is currently 12.75 percent, and the risk-free rate is 4 percent. What should be the current price per share of common stock?
a. $15.17
b. $17.28
c. $22.21
d. $19.10
e. None of the above.
Answer
This answer is hidden. It contains 236 characters.
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