You are considering an investment in Justus Corporation’s stock

You are considering an investment in Justus Corporation’s stock, which is expected to pay a dividend of $1.75 a share at the end of the year (D1 = $1.75) and has a beta of 0.9. The risk-free rate is 5.0%, and the market risk premium is 5.0%. Justus currently sells for $42.00 a share, and its dividend is expected to grow at some constant rate, g.


Q.  Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years?  Round your answer to two decimal places. Do not round your intermediate calculations.


Investing in stocks has always been a popular way to save and grow money, and Justus Corporation is no exception. This essay will discuss the required rate of return, risk factors, and dividend growth rate associated with investing in Justus Corporation stock. We will use the given information to analyze the market’s expected stock price at the end of 3 years.
The required rate of return is an important metric for investors to understand when assessing the potential of an investment. J Höhler and AO Lansink (2021) highlighted this in their work on agribusiness. The required rate of return is the minimum rate of return that an investor must receive on their investment in order to make the investment worthwhile. This rate is calculated based on the expected risk and return of an investment. The higher the risk, the higher the expected return must be. For example, Justus Corporation stock is a high risk investment with a high potential return. To properly assess this investment, investors must understand the required rate of return and how it is calculated. To calculate the required rate of return for Justus Corporation stock, investors must consider the expected return of the stock, the cost of the stock, the risk of the stock, and the time horizon of the investment. By understanding the required rate of return, investors can make more informed decisions about their investments and ensure that they are receiving the return they are expecting.
In order to assess the risk factors associated with investing in Justus Corporation stock, one must consider the various components of risk associated with emerging markets. As B Black states in the article “Emerging Markets Review” (2001), “risk is a multifaceted concept” (p. 7). These components include political, economic, and financial risk, among others. Political risk is the risk of an event or policy that may adversely affect the returns on an investment. Economic risk is the risk that a country’s macroeconomic policies will not be able to generate sufficient returns to offset the risks associated with investing in that country’s stocks. Finally, financial risk is the risk that currency fluctuations, market conditions, and other factors will damage the value of an investment. By assessing these risk factors, one can gain insight into the potential risks associated with investing in Justus Corporation stock.
The dividend growth rate of Justus Corporation stock has been the subject of much analysis. In 2012, JN Ouso conducted a study on the topic which was published in The study found that the dividend growth rate of Justus Corporation stock was highly uncertain and difficult to predict. Factors such as a company’s financial health, market conditions, and economic outlook can all have an effect on this rate. Ouso’s research showed that the dividend growth rate of Justus Corporation stock was highly dependent on the overall economic environment. If the economy was strong, the dividend growth rate was likely to be higher than in a weaker economic environment. Ouso also found that the stock’s dividend growth rate could be affected by the company’s ability to generate profits and its ability to invest in new opportunities. Ouso concluded that the dividend growth rate of Justus Corporation stock could not be accurately predicted, but rather should be monitored over time to ensure that the company was meeting its financial goals. This analysis can be used to inform an investor’s decision on whether or not to invest in Justus Corporation stock in the future.
Overall, the expected stock price at the end of three years can be calculated using the Gordon Growth Model. By taking the initial dividend of $1.75, the current stock price of $42.00, the risk-free rate of 5.0%, and the expected growth rate of g, a future stock price can be calculated. This exercise illustrates the importance of understanding market characteristics such as initial price, dividends, risk-free rate, and the market risk premium when evaluating an investment in Justus Corporation stock.
Work Cited
J Höhler., AO Lansink.”Measuring the impact of COVID‐19 on stock prices and profits in the food supply chain.”
B Black.”The corporate governance behavior and market value of Russian firms.”
“The effect of leverage on share prices at the Nairobi Securities Exchange.”

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