1.A recent investment analyst's report for Johnson & Johnson (JNJ) provided the following information:

Beta = 0.70Risk-free rate, r_RF = 2.0%Market risk premium, RP_M = 6%

Forecasted 2021 Dividend (D₁) = $4.04

Based on the information in this report, use the nonconstant dividend growth model to estimate JNJ's intrinsic stock value.More specifically:

a.Based on the data given above, what is the required return on JNJ's stock?Use the CAPM to estimate the firm's required return. 

b.Assume that today is January 1, 2021 and that at t = 1 the company will pay the dividend per share given above.(That is, assume that this forecasted 2021 dividend is D₁, and that this is the first cash flow you receive as an investor.)Assume that the dividend growth rate for the three years after 2021 (2022-2024, which correspond to Years 2, 3, and 4) is 15%.Assume that after 2024 (after Year 4), the dividend grows at a long-run constant growth rate of 3.0% a year.

(i)Given these assumptions, what is your estimate of the stock's intrinsic value? 

(ii)Compared to its current stock price, would you conclude that the stock is undervalued or overvalued?Provide a brief explanation. 

c.Set up a simple Excel data table where you show how the estimated intrinsic value varies as the long-run growth rate varies over the following range (2.00%, 2.25%, 2.50%, 2.75%, 3.00%, 3.25%, 3.50%, 3.75%, 4.00%, and 4.25%) - assuming everything else stays constant.Note that when you use the Excel Data Table feature, you can easily change assumptions about input values within your model and the Data Table values will simultaneously update. It is much easier to use the Excel Data Table feature.