Draw the cash flow diagram. b)If the expected market return is 12%, the risk-free rate is 5%, and the CAPM beta of the company XYZ is 0.8, what is the expected return on equity of the company? c)What is the expected current share price of the company from the dividend growth model?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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A company XYZ paid a dividend of Rs.12 per share yesterday and is expected to pay dividend once per year in the future (at same calendar date as this year) which will grow at a rate 5% to eternity.

a)Draw the cash flow diagram.

b)If the expected market return is 12%, the risk-free rate is 5%, and the CAPM beta of the company XYZ is 0.8, what is the expected return on equity of the company?

c)What is the expected current share price of the company from the dividend growth model?

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