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The Jackson-Timberlake Wardrobe Co. just paid a dividend of $1.56 per share on its stock. The dividends are expected to grow at a constant rate of 8 percent per year indefinitely. |
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a. If investors require a return of 13 percent on the company's stock, what is the current price? |
| b. What will the price be in 11 years? |
a.Current price=D1/(Required return-Growth rate)
=(1.56*1.08)/(0.13-0.08)
=$33.696
b.P11=Current price*(1+Growth rate)^11
=33.696*(1.08)^11
=$78.57(Approx).
The Jackson-Timberlake Wardrobe Co. just paid a dividend of $1.56 per share on its stock. The...