Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Excel Online Structured Activity: Constant growth You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend of $1.50 a

image text in transcribed

image text in transcribed

Excel Online Structured Activity: Constant growth You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend of $1.50 a share at the end of the year (D1=$1.50) and has a beta of 0.9 . The risk-free rate is 4.2%, and the market risk premium is 5.0%. Justus currently sells for $20.00 a share, and its dividend is expected to grow at some constant rate, g. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. Open spreadsheet 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 P3 ?) Round your answer to two decimal places. Do not round your intermediate calculations. \begin{tabular}{ll|r} 1 & Constant growth & \multicolumn{1}{c|}{ B } \\ \hline 2 & & \\ \hline 3 & Expected year-end dividend (D1) & $1.50 \\ \hline 4 & Beta coefficient & 0.90 \\ \hline 5 & Risk-free rate (rRF) & 4.20% \\ 6 & Market risk premium (RPM) & 5.00% \\ 7 & Current stock price (P0) & $20.00 \\ \hline 8 & Market in equilibrium & Yes \end{tabular}

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Commodity Finance Principles And Practice

Authors: Weixin Huang

1st Edition

1781371938, 978-1781371930

More Books

Students also viewed these Finance questions

Question

-22/9 (-33/18) Perform the indicated operation by hand.

Answered: 1 week ago

Question

2 8 . .

Answered: 1 week ago

Question

5. Discuss the key roles for training professionals.

Answered: 1 week ago