You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend of $2.00 a share at the end of the year (D₁ = $2.00) and has a beta of 0.9. The risk-free rate is 4.5%, and the market risk premium is 5.5%. Justus currently sells for $31.00 a share, and its dividend is expected to grow at some constant rate, g.

Constant growth Expected yearend dividend (D1) $2.00 Beta coefcient 0.90 Risk-free rate (rRF) 4.50% Market risk premium (RPM) 5.50% Current stock price (Po) $31.00 Market in equilibrium Yes Formulas Calculate required return: Required return on common stock :1: Calculate constant growth rate, 9: Total return on common stock Expected dividend yield Expected capital gains yield Calculate stock price in 3 years, P3: Number of years from today 3 Calculate Pa using Pa -: Alternative calculation: Calculate Pa using dividends