Jcpenney company is expected to pay a dividend in year 1 of $1.65, a dividend in year 2 of $1.97, and a dividend in year 3 of $2.54. after year 3, dividends are expected to grow at the rate of 8% per year. an appropriate required return for the stock is 11%. the stock should be worth today. $33.00 $40.67 $71.80 $66.00

Consider the following calculation

Explanation:

Present value of stock=Dividend in year 1/(1+required return)^1+Dividend in year 2/(1+required return)^2+Dividend in year 3/(1+required return)^3+Terminal value/(1+required return)^3

Terminal value=(Dividend in year 3)*(1+growth rate)/(Required return - growth rate)

Given that the required return is 11% and growth rate is 8%.

Terminal value=2.54*(1+8%)/(11%-8%)

=(2.54*1.08)/(0.03)

=2.7432/0.03

=91.44

Given that, dividend in year 1=$1.65, in year 2 dividend=$1.97, dividend in year 3 =$2.54

Present value=1.65/(1+11%)^1+1.97/(1+11%)^2+2.54/(1+11%)^3+91.44/(1+11%)^3

=1.65/(1.11)^1+1.97/(1.11)^2+2.54/(1.11)^3+91.44/(1.11)^3

=1.65/1.11+1.97/1.2321+2.54/1.367631+91.44/1.367631

=1.486486486+1.598896193+1.857226109+66.86013991

=71.8027487 or $71.80 (Rounded to two decimal places)

employers prefer to hire ingenious, resourceful people because ingenious people may be more liable to engage in unethical deportment as they can cerebrate outside of the box

answer; normative economics;