As an equity analyst, you have derived the following information for the three companies listed. Note: The estimated values are the present value of the future price and dividend at the end of the investment period Company Current price () Estimated Estimated

price () dividend () Beta

A plc 20 23 0.50 1.2

B Plc 45 49 1.50 1.9

C plc 37 40 1.20 0.67 Required: (a) Based on the data in the table, calculate the estimated return for each company.

In the investment period, you expect the Risk free rate of return to be 6% and the Average market return to be 10% (b) Using the Capital Asset Pricing Model (CAPM) calculate the required return for each company.

(c) Based on your calculations in part (a) and part (b) advise whether you think the companys shares are undervalued or overvalued.

(d) While the capital asset pricing model (CAPM) has been widely used to analyse shares and manage portfolios, it has also been widely criticized as providing too simple a view of risk. Critically assess the CAPM theory.