Assume that the risk-free rate of interest is 6% and the expected rate of return on the market is 16%. Consider the questions separately. Required: a. A share of stock sells for $50 today. It will pay a dividend of $6 per share at the end of the year. Its beta is 1.2. Calculate the expected value of the stock at the end of the year. (2 marks) Peter is going to acquire a firm with an expected perpetual cash flow of $1,250 but is not sure about its risk. If he estimates the beta of a firm is 0.5, when in fact the beta is really 1.0, compute how much more will he offer for the firm than it is truly worth. (8 marks) (2 marks) b. c. A stock has an expected rate of return of 4%, determine its beta