Challenging Problems 21-24 8-21 You are analyzing Jillian's Jewellery (J) stock for a possible purchase. JJ just paid a dividend Constant Growth of $1.50 yesterday. You expect the dividend to grow at the rate of 6% per year for the next Stock Valuation 3 years, if you buy the stock, you plan to hold it for 3 years and then sell it. a. What dividends do you expect for JJ stock over the next 3 years? In other words, calcu- late D, D, and D. b. II's stock has a required return of 13% and so this is the rate you'll use to discount divi- dends. Find the present value of the dividend stream; that is, calculate the PV of D, D, and Dy, and then sum these PVs. NEL 1 stock should trade for the Discounted at a 13 rate what the pre In other words, calculate the P of $2205 d. If you plan to buy the stock, hold it for years and then we most you should pay for it? the e. Use the constant growth model to calculate the present value of this stock Assume that g = 6and is constant f. f Is the value of this stock dependent on how long you plan to hold it? In other words if your planned holding period were 2 years or 5 years rather than 3 years, would this affect the value of the stock today, P,? Explain your answer. 8-22 Reizenstein Technologies (RT) has just developed a solar panel corable n a tin showenging Problems 21-24 8-21 You are analyzing Jillian's Jewellery () stock for a possible purchase. I just paid a dividend Constant Growth of $1.50 yesterday. You expect the dividend to grow at the rate of 6% per year for the next Stock Valuation 3 years, if you buy the stock, you plan to hold it for 3 years and then sell it a. What dividends do you expect for JJ stock over the next 3 years? In other words, calcu- late D, D, and D b. II's stock has a required return of 13% and so this is the rate you'll use to discount divi- dends. Find the present value of the dividend stream that is calculate the PV of D, D and Ds, and then sum these PVs. c JJ stock should trade for $27.05 3 years from now i.e., you expect P, = $27.05). Discounted at a 13% rate, what is the present value of this expected future stock price? In other words, calculate the PV of $27.05. d. If you plan to buy the stock, hold it for 3 years, and then sell it for $27.05, what is the most you should pay for it? e. Use the constant growth model to calculate the present value of this stock. Assume that g=6% and is constant. f is the value of this stock dependent on how long you plan to hold it? In other words, if your planned holding period were 2 years or 5 years rather than 3 vears, would this! affect the value of the stock dan lain f