CONSTANT GROWTH 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 of the year (D 1 = $2.25) and has a beta of 0.9. The risk-free rate is 4.9%, and the market risk premium is 5%. Justus currently sells for $46.00 a share, and its dividend is expected to grow at some constant rate, g. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years? (That is, what is P ^ 3 ?)

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Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781337395250
BuyFind

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781337395250

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Chapter
Section
Chapter 9, Problem 13P
Textbook Problem

CONSTANT GROWTH 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 of the year (D1 = $2.25) and has a beta of 0.9. The risk-free rate is 4.9%, and the market risk premium is 5%. Justus currently sells for $46.00 a share, and its dividend is expected to grow at some constant rate, g. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years? (That is, what is P ^ 3 ?)

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Chapter 9 Solutions

Fundamentals of Financial Management (MindTap Course List)
Ch. 9.A - For a stock to be in equilibrium, what two...Ch. 9.A - If a stock is not in equilibrium, explain how...Ch. 9.A - RATES OF RETURN AND EQUILIBRIUM Stock Cs beta...Ch. 9.A - EQUILIBRIUM STOCK PRICE The risk-free rate of...Ch. 9.A - BETA COEFFICIENTS Suppose Chance Chemical Companys...Ch. 9 - It is frequently stated that the one purpose of...Ch. 9 - Is the following equation correct for finding the...Ch. 9 - If you bought a share of common stock, you would...Ch. 9 - Two investors are evaluating GEs stock for...Ch. 9 - A bond that pays interest forever and has no...Ch. 9 - Discuss the similarities and differences between...Ch. 9 - This chapter discusses the discounted dividend and...Ch. 9 - How do non-operating assets impact a firms...Ch. 9 - DPS CALCULATION Weston Corporation just paid a...Ch. 9 - CONSTANT GROWTH VALUATION Tresnan Brothers is...Ch. 9 - CONSTANT GROWTH VALUATION Holtzman Clothierss...Ch. 9 - NONCONSTANT GROWTH VALUATION Holt Enterprises...Ch. 9 - CORPORATE VALUATION Scampini Technologies is...Ch. 9 - PREFERRED STOCK VALUATION Farley Inc. has...Ch. 9 - PREFERRED STOCK RATE OF RETURN What will be the...Ch. 9 - PREFERRED STOCK VALUATION Earley Corporation...Ch. 9 - PREFERRED STOCK RETURNS Avondale Aeronautics has...Ch. 9 - VALUATION OF A DECLINING GROWTH STOCK Maxwell...Ch. 9 - Suppose you believe that the economy is just...Ch. 9 - VALUATION OF A CONSTANT GROWTH STOCK Investors...Ch. 9 - CONSTANT GROWTH You are considering an investment...Ch. 9 - NONCONSTANT GROWTH Computech Corporation is...Ch. 9 - CORPORATE VALUATION Dantzler Corporation is a...Ch. 9 - NONCONSTANT GROWTH Carnes Cosmetics Co.s stock...Ch. 9 - CONSTANT GROWTH Your broker offers to sell you...Ch. 9 - NONCONSTANT GROWTH STOCK VALUATION Taussig...Ch. 9 - CORPORATE VALUATION Brandtly Industries invests a...Ch. 9 - CORPORATE VALUE MODEL Assume that today is...Ch. 9 - NONCONSTANT GROWTH Assume that it is now january...Ch. 9 - Comprehensive/Spreadsheet Problem NONCONSTANT...Ch. 9 - STOCK VALUATION Robert Balik and Carol Kiefer are...Ch. 9 - Estimating Exxon Mobil Corporation's Intrinsic...Ch. 9 - Estimating Exxon Mobil Corporation's Intrinsic...Ch. 9 - Estimating Exxon Mobil Corporation's Intrinsic...Ch. 9 - Estimating Exxon Mobil Corporation's Intrinsic...Ch. 9 - Estimating Exxon Mobil Corporation's Intrinsic...Ch. 9 - Estimating Exxon Mobil Corporation's Intrinsic...Ch. 9 - Estimating Exxon Mobil Corporation's Intrinsic...Ch. 9 - Estimating Exxon Mobil Corporation's Intrinsic...Ch. 9 - Estimating Exxon Mobil Corporation's Intrinsic...Ch. 9 - Estimating Exxon Mobil Corporation's Intrinsic...

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