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8. General Motors Company (GM), which is currently selling for $26.25 a share, paid an annualized dividend of $1.52/share in the year just ended. It
8. General Motors Company (GM), which is currently selling for $26.25 a share, paid an annualized dividend of $1.52/share in the year just ended. It is expected that dividends and earnings will grow indefinitely at a rate of 3.1%. First, estimate the implied rate of return for GMs common stock using the Constant Growth Model. Second, use the CAPM to estimate a fair required rate of return on GM given that its beta is 1.34, the required rate of return on the market is 10%, and the risk free rate is 3%.
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