Question

Jambo Company just paid a dividend of $2.00 and is expected to increase the dividend next year to $3.5, to $5 after that. Dividend is expected to be $7.5 three years from now increasing to $8 a year after that and threafter, it is expected to grow at industry average rate of 5% forever. If the cost of equity for Jambo is 10%, what is its expected stock price today?

A) $203

B) $165 (it says this one is wrong)

C) $133

D) $103

Answer #1

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