Posted by **Heidi** on Tuesday, October 28, 2008 at 9:34pm.

K this is what I have so far. I am wondering if i did the CAPM right and if that is all i need for that part and then I need to know how to do the Constant Growth Model.

When you do yours, assume the risk-free return as 6%

Assume the expected market return 12%

The beta, dividend, and share price will come from the stock you select.

______________________________________...

Assuming the following:

Risk-Free Return = 6%

Expected market return = 12%

Beta = - 0.22 %

Dividend = .95

Share price at the beginning of the period= $53.71

Find the share price at the end of the period for the given expected value.

First, calculate the expected return on the firm’s share from CAPM:

Expected return = Risk-free rate (1 – Beta) + Beta (Expected market value rate of Return)

= 0.06 (.95 – 0.22) + 0.22 (0.12)

= 0.0438 + 0.0264

= 0.702 would make it 7%

Then, calculate the ending price that supports and 7% expected return.

For calculating the ending price, apply the net rate of return formula as under:

Expected return = [(Expected ending price + Expected dividend) / Beginning price] - 1

.07 = [P (end) + .95/53.71] -1

1.02 = [P (end) + .95] / 53.71

53.71 x 1.02 = P (end) + .95

54.78 = P (end) + .95

54.78 - .95 = P (end)

P (end) = $53.83

## Answer This Question

## Related Questions

- Math - I am writing a single paragraph of the Pythagorean Theorem and was ...
- English - I urgently need you to check these few sentences, Writeacher. Thank ...
- English - Thank you very much. I just have a few doubts about an email I need to...
- English - I need your help to rephrase the description of Friday in Defoe's ...
- math - my sun in thea 1st grade me no understand to much english i need very ...
- animal biology - Do whales have belly buttons? I really need to know. If anyone ...
- Finance - I really really need some help on this one!!! All I need is for ...
- Algebra - (I am not sure how to get the y value for part C and the whole part D...
- College Algebra - (I am not sure how to get the y value for part C and the whole...
- Math - Part 1 of the Question: A rectangular field is 120m long and 80m wide. If...

More Related Questions