Given the information provided above, compute the sustainable growth rate, the required rate of return for Faulk Corporation's stock and the current price for this stock

Finance Basics

Faulk Corp is going through a period of growth. The company just paid a dividend of $1.50 per share and expects dividends to grow at a 22% rate for the next 7 years and then level off to a constant rate thereafter. The beta of stock is 1.4, the risk free rate of return is 5%, and the expected return on the market is 11%. The company has net income of $2.50 per share, and a return on equity of 14%.

Given the information provided above, compute the sustainable growth rate, the required rate of return for Faulk Corporation’s stock and the current price for this stock?

 

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