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Problem 11-05 Jersey Jewel Mining has a beta coefficient of 1.7. Currently the risk-free rate is 3 percent and the anticipated return on the market
Problem 11-05
Jersey Jewel Mining has a beta coefficient of 1.7. Currently the risk-free rate is 3 percent and the anticipated return on the market is 8 percent. JJM pays a $5.00 dividend that is growing at 9 percent annually. Do not round intermediate calculations.
%
$
The stock -Select-isis notItem 3 overvalued and -Select-shouldshould notItem 4 be purchased.
$
The stock is -Select-overvaluedundervaluedItem 6 and -Select-shouldshould notItem 7 be purchased.
- What is the required return for JJM? Round your answer to two decimal places.
- Given the required return, what is the value of the stock? Round your answer to the nearest cent.
- If the stock is selling for $236, what should you do?
- If the beta coefficient declines to 1.6, what is the new value of the stock? Round your answer to the nearest cent.
- If the price remains $236, what course of action should you take given the valuation in d?
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