Problem:
A stock has the required rate of return at 16%. The most recent divident paid is $2.00 and the expected dividend growth rate is 10%. The first dividend expected to pay $2.20 at the end of the year.
Requirement:
Question 1: What's the estimated value of the stock?
Question 2: If the current trading price of the stock on the stock market is $22.28 per share, what recommedation should we give to the stock?
Note: Please explain comprehensively and give step by step solution.