INV3 P5c Victoria Company’s beta is exactly 2, and the market risk premium is 8%, with a risk-free rate of 4%. The company’s most recent dividend was $5 per share, and the dividend is expected to grow...

INV3 P5c

Victoria Company’s beta is exactly 2, and the market risk premium is 8%, with a risk-free rate of 4%. The company’s most recent dividend was $5 per share, and the dividend is expected to grow at 15% for the next three years and then grow at 6% per year indefinitely.

If all the expectations stay the same as stated, what would the share price be a year from now? What would be your capital gain if you owned a share for the year? Show that this gain is consistent with the expected dividend yield calculated above.