A stock sells for $35.00 today and is expected to pay a dividend of $1.50 next year. The stock's Beta is estimated to be 0.80. You know that rf = 4% and rm = 12%.

a) Suppose you are told the stock is going to sell for $41 next year. Is the stock a good buy?

b) Suppose you are uncertain about the Beta estimate for this stock. Considering the information from the goddess, what is the highest value of Beta that would justify the stock's current price?