1. IBM expects earnings this year of $14.50 per share, and it plans to pay a $2.65 dividend to shareholders. IBM will reinvest its retained earnings in new projects that have an expected return of 14.0% per year. Suppose IBM will maintain the same dividend payout rate, retention rate, and return on new investments and will not change its number of outstanding shares. If IBM's equity cost of capital is 18.50%, what price would you estimate for IBM stock? A) $14.32 9=11,45 9211.45 B) $58.89 14.50 14,50 C) $18.14 D) $37.54 5.5725 mm 2.65 it =D 205 E 14,50 = 182 Vr=818., 14=11,45 2. Since beta is consistent regardless of the time interval you choose (day, month, or year) or how far back you look (3 months or 50 years), using CAPM is an adequate model for estimating the discount rate of a leveraged firm. A) True