Question

You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend of $2.25 a share at the end of the year (D₁ = $2.25) and has a beta of 0.9. The risk-free rate is 3.4%, and the market risk premium is 4%. Justus currently sells for $43.00 a share, and its dividend is expected to grow at some constant rate, g. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years? (That is, what is ?) Do not round intermediate calculations. Round your answer to the nearest cent.

Answer 1

Amway con los calculation of stock price of the and of 3 year - Step! Calculation of Growth rate (a) Pn DI ke-u ke- date t Ruk fuce 3-404 + Betax Market is k premium 0.90 x 4% 8.40%. + 3.60% 7.00Y. Growth rate (a) Z Ke - DI Price 7% $2.25 $43 74.-0.0523 Z 74. - 5.23 7. + 1,71 %. Step2 Rhei the stock at the end of 3 years Prie (P₂) Dy of Ke-a 2 Dilite) $2.25 x (1.0177) 99,- 1.77%. 5:23 % 2.371602 52 $ 45:35 Amwen