View the step-by-step solution to:

The Jackson-Timberlake Wardrobe Company just paid a dividend of $1.95 per share on its stock. The dividends are expected to grow at a constant rate...

The Jackson-Timberlake Wardrobe Company just paid a dividend of $1.95 per share on its stock. The dividends are expected to grow at a constant rate of 4% per year indefinitely. If investors require a return of 10.5% on The Jackson-Timberlake Wardrobe Company stock, what is the current price? What will the price in in 3 years? In 15 years?


Please give explanation and breakdown

Top Answer

Current price = 31.20 Price... View the full answer

5 comments
  • do you know how to do this in excel
    • gpicon1064
    • Apr 04, 2018 at 9:28pm
  • Current price, you can input like this =(1.95*1.04)/(0.105-0.04)
    • dinamarcanete
    • Apr 04, 2018 at 9:38pm
  • =(dividend x 1+ growth rate) / (rate - growth rate)
    • dinamarcanete
    • Apr 04, 2018 at 9:39pm
  • For specific price in a year: =Current price*(1+growth rate)^n
    • dinamarcanete
    • Apr 04, 2018 at 9:40pm
  • Example: in 3 years = =31.2*(1+0.04)^3
    • dinamarcanete
    • Apr 04, 2018 at 9:41pm

Sign up to view the full answer

Other Answers

Current Price = D1/(ke-g) = $1.95 x (1.04) 1 (0.105-0.04) = $2.028/0.065 = $31.20... View the full answer

The answer is... View the full answer

3 comments
  • do you know how to do this in excel
    • gpicon1064
    • Apr 04, 2018 at 9:37pm
  • yes, I actually worked on an excel to derive the answer. if you copy (1.95*((1.04)^16)) with an equal to sign, it will give you the result 3.652313. there is no provision on the site to attach an excel file
    • payaljain3
    • Apr 04, 2018 at 9:48pm
  • likewise you can use all the above calculations and copy paste in excel after an equal to sign
    • payaljain3
    • Apr 04, 2018 at 9:50pm

The Correct Answer is given... View the full answer

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
Ask a homework question - tutors are online