Jersey Jewel Mining has a beta coefficient of 1.2. Currently the risk-free rate is 2 percent and the anticipated return on the market is 8 percent.
JJM pays a $4.50 dividend that is growing at 4 percent annually.
What is the required return for JJM?
Given the required return, what is the value of the stock?
If the stock is selling for $100, what should you do?
If the beta coefficient declines to 1.0, what is the new value of the stock?
If the price remains $100, what course of action should you take given the valuation in d?