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3. Leilas stock is currently selling for $50.00. The expected dividend one year from now is $2 and the required return is 12
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Answer #1

1.

Using Constant Growth Model,

50 = 2/(0.12 - g)

g = 8.0%

2.

Using CAPM Model,

Return Rate = 0.03 + 1.50(0.09 - 0.03)

Return Rate = 12.0%

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