Question: How much would you be willing to pay for one share of Juno if, all else equal, its dividend grows at 8% a year for
How much would you be willing to pay for one share of Juno if, all else equal, its dividend grows at 8% a year for the next 3 years, and then at a constant 6% forever?
Edit: The previous question and answer are the following:
Juno Mining Company current dividend (at time 0) is $0.50 a share. Its dividend growth rate is expected to be 8% a year forever. How much would you pay for a share if your required rate of return is 15%?
Expected dividend = $0.50*1.08 =0.54
| Stock price = D1 / r - g |
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| D1 = Expected Dividend |
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| r= required rate of return |
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| g= growth rate |
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| =0.54/0.15-0.08 |
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| =7.71 |
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