Question
Jedi Corp. common stock is expected to pay their first dividend of $2 at the end of two years from today. Once the firm starts
Jedi Corp. common stock is expected to pay their first dividend of $2 at the end of two years from today. Once the firm starts paying dividends, analysts expect the dividends to grow at a supernormal rate of 8% for the next year, and then attain a constant growth of 2% forever thereafter. The firms beta is 1.2, the risk-free rate of return is estimated to be 4.5%, and the market risk premium is 2.5%. (Please explain without using excel) a) What is the value of Jedis stock today? b) WhatisthevalueoftheJediCorp.stockexpectedtobein2years,iftherequiredrateofreturn on the stock remains constant?
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