JK Industries (JKI) will have earnings per share of $4 this year and will pay out $1.75 to shareholders in the form of a dividend. The firm’s net income and its dividends will grow at 20% for the next 3 years. Beyond this high growth phase, JKI’s growth rate will stabilize. In the long term, JKI's return on new investments is 15% and payout ratio is 75%. JKI’s equity cost of capital is 10%. The value of a share of JKI's stock today is closest to ________. Assume that the current year has just begun i.e., the current year is year 1 on the timeline.

Answer rating: 100% (QA)

To calculate the value of JKIs stock today we can use the Dividend Discount Model DDM under the assu... View the full answer