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Jersey Jewel Mining has a beta coefficient of 1.2. Currently the risk-free rate is 5 percent and the anticipated return on the market is 11 percent. JJM pays a $4.50 dividend that is growing at 6 percent annually.
a. What is the required return for JJM?b. Given the required return, what is the value of the stock?c. If the stock is selling for $80, what should you do?d. If the beta coefficient declines to 1.0, what is the new value of the stock?e. If the price remains $80, what course of action should you take given the valuation in (d)?
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