4. JEF Inc. just paid a $1.30 dividend, and it is expected to grow at 40% for the next 3 years. After 3 years the dividend is expected to grow at the rate of 7% indefinitely. If the required return is 12.7%, what is the stock's value today

The stock's value today is $53.33

Explanation:

The value of a stock can be calculated by determining the present value of associated cash flows

First, we need to calculate the expected dividend each year

Year Dividend

1$1.30 x ( 1 + 40% ) = $1.8200

2$1.82 x ( 1 + 40% ) = $2.5480

3$2.548 x ( 1 + 40% ) = $3.5672

4$3.5672 x ( 1 + 7% ) = $3.8169

Now calculate the present value of the dividends

Year Present value

1$1.8200 x ( 1 + 12.7% )^-1 = $2.0511

2$2.5480 x ( 1 + 12.7% )^-2 = $2.0061

3$3.5672 x ( 1 + 12.7% )^-3 = $2.4920

4[ $3.8169 / ( 12.7% - 7% ) ] x ( 1 + 12.7% )^-3 = $46.7804

Hence,

Value of Stock = $2.0511 + $2.0061 + $2.4920 + $46.7804 = $53.3296 = $53.33

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explanation:

whole quiz

1. the sum of all activities involved in getting high-quality products into the marketplace

2.operations

3. the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.

4. produced; performed

5. activities producing tangible products, such as radios, newspapers, buses, and textbooks.

6. activities producing intangible and tangible products, such as entertainment, transportation, and education.

7.   customer focus

8. analyzing a competitor's products to identify desirable improvements

9. the systematic direction and control of the processes that transform resources into finished projects that create value for and provide benefits to consumers.

10. operation management.

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