Problem:
A company pays a dividend a $2 per share (D_0=$2). It is estimated that the company's dividend will grow at a rate of $20% for the next 2 years, and then at a constant rate of 7% thereafter. The company's stock has a beta of 1.2, the risk free rate is 7.5%, and the market risk premium is 4%.
Requirement:
Question: What is your estimate of the stock's current price?
Note: Please explain comprehensively and give step by step solution.