Reference no: EM132569659
Subject: Financial management
You are analysing Jilani's Jewellery (JJ) stock for a possible purchase. JJ just paid a dividend of Rs.8.25 yesterday. You expect the dividend to grow at the rate of 6% per year for the next 3 years; if you buy the stock, you plan to hold it for 3 years and then sell it.
i. What dividends do you expect for JJ stock over the next 3 years? In other words, calculate D1, D2, and D3. Note that D0 Rs.8.25.
ii. JJ stock has a required return of 13%, the rate you will use to discount dividends. Find the present value of the dividend stream; that is, calculate the PV of D1, D2, and D3, and then sum these PVs.
iii. JJ stock should trade for Rs.148.78 3 years from now (i.e., you expect
Discounted at a 13% rate, what is the present value of this expected future stock price? In other words, calculate the PV of Rs.148.78.
iv. If you plan to buy the stock, hold it for 3 years, and then sell it for Rs.148.78, what is the most you should pay for it?
v. Use the constant growth model to calculate the present value of this stock. Assume that gL 6% and is constant.
vi. Is the value of this stock dependent on how long you plan to hold it? In other words, if your planned holding period were 2 years or 5 years rather than 3 years, would this affect the value of the stock today, ?^0? Explain your answer.
Please donot copy from chegg or any other website I needed unique work and please could you explain in detail (ASAP)
Please show all the calculations, and formula used.
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: You are analysing Jilani's Jewellery (JJ) stock for a possible purchase. JJ just paid a dividend of Rs.8.25 yesterday. You expect the dividend to grow
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