You are considering an investment in the common stock of Cowher Corp. The stock is expected to pay a dividend of $2 per share at the end of the year. The stock has a beta equal to 1.2. The risk-free rate is 6%. The market risk premium is 5%. The stock's dividend is expected to grow at some constant rate, g. The stock currently sells for $40 a share.
Assuming the market is in equilibrium, what does the market believe the stock price will be at the end of three years?
