As a public listed company,Wesfarmers Ltd.is also considering issuing ordinary shares to raise capital.

i)Wesfarmers Ltd. has a beta of 1.3. Long-term treasury bonds are yielding 4% per annum and the long-term return of the ASX200 (i.e. the market portfolio) is 10% per annum. Using CAPM, calculate the expected rate of return ofWesfarmers Ltd.

ii)If the company is expected to pay a dividend of $2.5/share at the end of year 2 and dividends will grow at a constant rate of 3% per annum forever, what is the implied value of one of the issued shares?

iii)IfWesfarmers Ltd.intends to sell the shares at $35/share, would you purchase it? Briefly explain why?