1. Assume that Sugar Land (SL) has a beta coefficient of 1.7, that the risk-free rate, KF (the yield on 10-year T-bonds) is 7 percent, and that the market risk premium (KM KF) is 5 percent. What is the required rate of return on SLs stock according to CAPM?

2. Assume that SL is a constant growth company whose last dividend (D0), which was paid yesterday) was $2.00, and whose dividend is expected to grow indefinitely at a 4 percent rate. Assume the required rate of return for SL is 13%, (Different from your estimate of 1 above).

A. What is the firms expected dividend stream over the next 3 years?

B. What is the firms current stock price?

C. What is the stock's expected value 1 year from now?

D. What is the expected dividend yield, the capital gains yield, and the total return during the first year?