Homework Answers
| Dividend (D1)= $3.60 | ||||
| Price of Share (Po) = $60 per share | ||||
| Growth Rate (g) = 9.6% | ||||
| Risk free rate of return (Rf)= 4% | ||||
| Market Return (Rm)= 12% | ||||
| Return on share (Ke) | ||||
| Ke = | D1 | + | g | |
| Po | ||||
| = | 3.6 | + | 9.60% | |
| 60 | ||||
| = | 15.60% | |||
| As per CAPM Model, | ||||
| Ke = Rf + Beta(Rm-Rf) | ||||
| 15.60% = 4% +Beta(12%-4%) | ||||
| Beta = 1.45 |
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