7 Integrative Risk and Valuation Given the following information for the stock of Foster Company, calculate the risk premium on its common stock. (Click on the icon located on the top right comer of the data table below in order to copy its contents into a spreadsheet) Current price per share of common stock $49.69 Expected dividend per share next year $3,84 Constant annual dividend growth rate 5.3% Risk-free rate of return 4.1% The risk premium on Foster stock is %. (Round to two decimal places.) 8. Rate of return Douglas Keel, a financial analyst for Orange Industries, wishes to estimate the rate of return for two similar-risk investments, X and Y. Douglas's research indicates that the immediate past returns will serve as reasonable estimates of future returns. A year earlier, investment X had a market value of $22,000, and investment Y had a market value of $68,000. During the year, investment X generated cash flow of $1,650 and investment Y generated cash flow of $9,644. The current market values of investments X and Y are $22,593 and $68,000, respectively. a. Calculate the expected rate of return on investments X and Y using the most recent year's data. b. Assuming that the two investments are equally risky, which one should Douglas recommend? Why? a. The expected rate of return on investment X is %. (Round to two decimal places.) The expected rate of return on investment Y is % (Round to two decimal places.) b. Assuming that the two investments are equally risky, which one should Douglas recommend? Why? (Select the best answer below.) A. Douglas should recommend investment X because it has a higher rate of retum and equal risk. O B. Douglas should recommend investment X because it has a higher rate of return and lower Tisk OC. Douglas should recommend investment Y because it has a lower rate of return and equal risk. D. Douglas should recommend investment Y because it has a higher rate of return and equal risk