Gates Industries' Current Common Stock Dividend (Year 0) Is $2

Multiple Choice

Gates Industries' current common stock dividend (year 0) is $2.50 per share and is expected to continue growing at a rate of 5% per year for the foreseeable future. Currently the risk-free rate is 7.5% and the estimated market risk premium (i.e., k_m - r_f) is 8.3%. Value Line has estimated Gates Industries' beta to be 1.10. Determine the expected price for Gates Industries, common stock.

A) $21.50
B) $15.03
C) $15.78
D) $22.57