You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend...

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You are considering an investment in Justus Corporation's stock,which is expected to pay a dividend of $2.25 a share at the end ofthe year (D₁ = $2.25) and has a beta of 0.9. Therisk-free rate is 4.8%, and the market risk premium is 4.5%. Justuscurrently sells for $40.00 a share, and its dividend is expected togrow at some constant rate, g. Assuming the market is inequilibrium, what does the market believe will be the stock priceat the end of 3 years? (That is, what is ?) Round your answer totwo decimal places. Do not round your intermediatecalculations.

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3.7 Ratings (482 Votes)

Risk free rate 48 Beta 09 Market risk premium 45 Since market is in equilibrium therefore cost of equity expected rate return of stock We can use CAPM to find See Answer

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You are considering an investment in Justus Corporation's stock,which is expected to pay a dividend of $2.25 a share at the end ofthe year (D1 = $2.25) and has a beta of 0.9. Therisk-free rate is 4.8%, and the market risk premium is 4.5%. Justuscurrently sells for $40.00 a share, and its dividend is expected togrow at some constant rate, g. Assuming the market is inequilibrium, what does the market believe will be the stock priceat the end of 3 years? (That is, what is ?) Round your answer totwo decimal places. Do not round your intermediatecalculations.