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Jersey Jewel Mining has a beta coofficient of 1.2. Currently the risk-free rate is 2 percent and the anticipated return on the market is 8
Jersey Jewel Mining has a beta coofficient of 1.2. Currently the risk-free rate is 2 percent and the anticipated return on the market is 8 percent. JJM pays a $4.50 dividend that is growing at 4 percent annually.
a. What is the required return for JJM?
b. Given the required return, what is the value of the stock?
c. If the stock is selling for $100, what should you do?
d. If the beta coefficient declines to 1.0, what is the new value of the stock?
e. If the price remains $100, what course of action should you take given the valuation in d?
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