1.

SAR companys ordinary shares are expected to pay $

2

per share in dividends in

4

years and after which the dividends are expected to grow at

2%

annually forever. Company ABC's shares have a beta of

1.6.

The long-term return of ASX200 is

7.8%

and the return of T-bonds is

3.1%.

a.What is the expected return of SARs shares according to the CAPM?

b.What is the implied price per share?