7. Maspeth Robotics shares are currently selling for 24 (i.e. the market price) and have paid a dividend of 1 per share for the most recent year. The following additional information is given:

The risk-free rate is 4 percent;

The shares have an estimated beta of 1.2; and

The equity risk premium is estimated at 5 percent.

Based on the above information, determine the constant dividend growth rate that would be required to justify the market price.

12. Sime Natural Cosmetics Ltd. has a dividend yield of 2 percent based on the current dividend and a mature phase dividend growth rate of 5 percent a year. The current dividend growth rate is 10 percent a year, but the growth rate is expected to decline linearly to its mature phase value during the next six years.

A. Apply the H-model to determine the expected rate of return on its shares. Assume Sime Natural Cosmetics is fairly priced in the marketplace.

Expected rate of return = _______ percent