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You are analyzing Jillians Jewlery (JJ) stock for a possible purchase. JJ just paid a dividend of $2.25 yesterday. You expect the dividend to grow

  1. You are analyzing Jillians Jewlery (JJ) stock for a possible purchase. JJ just paid a dividend of $2.25 yesterday. You expect the dividend to grow at the rate of 5% per year for the next 3 years; if you buy the stock, you plan to hold it for 3 years and then sell it.

    If you plan to buy the stock, hold it for 3 years, and then sell it for $25.00, what is the most you should pay for it? Assume a cost of capital of 10%.

    $22.71
    $24.94
    $25.00
    $27.05
    $20.74

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