Diamond House Exporting has a beta of 1.20, the risk-free rate of interest is currently 8% and the required return on the market portfolio is 15%. The company paid a dividend of 5.86 per share in the most recent year 2020 and anticipates that its future dividends will increase at an annual rate consistent with that experienced over the 1026-2020 period.

Year	2016	17	18	19	20
Dividend	4.00	4.11	4.97	5.35	5.86

1. Use the capital asset pricing model (CAPM) to determine the required return on the company's stock.

2. Using the constant-growth model and your finding in part 1, estimate the value of the company's stock.

3. Judging on the basis of your finding in part 2, if the stock is currently trading at 120 per share, should you buy the stock?

Please explain and show work.