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JC stock currently does not pay any dividends, but it is expected to begin paying a dividend of $2 a share starting three years from
JC stock currently does not pay any dividends, but it is expected to begin paying a dividend of $2 a share starting three years from today. Once established the dividends are expected to grow by 15% a year for 2 years, then finally reach their constant growth rate of 3% perpetually. JC has a beta of 2, the risk-free rate of return is equal to 6% and the required return on the market is 10%.
- What is JC's required rate of return?
- What should the price of a share of JC's stock be today?
- What is your estimate of dividend yield and capital gains yield on JC's stock in the current year?
- What is the expected price for AmaZoo in four years (P4) and what is your estimate of dividend yield and capital gains yield in four years?
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