1. Barnacle Ltd. is a publicly listed company that your client is following

closely, however your client does not have the requisite skills to evaluate the company

and, as such, has provided you with sufficient information. The historical price of

Barnacle Ltd. is given below.

Barnacle Ltd. is closely integrated with the following rates of return, Treasury bills currently pay a return of 3% p.a., and the stock

market return over the same period averaged 12% p.a. You have calculated the standard

deviation of the market returns to be 9% p.a. Barnacle's beta is estimated at 0.95. Lastly,

you have identified the historical returns and dividends (below).

year

price

dividend

2010

$8.35

2011

$9.23

$0.60

2012

$9.76

$0.75

2013

$8.65

2014

$9.89

2015

$10.50

$0.75

2016

$10.45

$0.45

2017

$13.05

Using the above information, identify whether it is a good idea, for your client, to invest

in Barnacle. Explain your reasoning for your decision.