Lawrence Industries' most recent annual dividend was $1.80 per share (D0 = $1.80). The company expects its dividend to grow at 8% annually for next 3 years, followed by a 4% constant annual growth rate in years 5 to infinity. Market data indicates a beta of 1.25 for Lord of Chips. The expected return on the market portfolio is 9%

You are required to;

(i) Calculate the required rate of return for Lawrence Industries' shares using the CAPM assuming a risk-free rate of 5%.

(ii) What is the maximum price per share that Lawrence Industries should set forordinary shares if the company have plan to make a new share issue?

(iii) If Lord of Chips' shares are traded in the market at $38.50 what would be your recommendation to Lawrence Industries on their proposed share issue? Justify your answer.

(iv) 'The price of a financial asset in the market is depend on the degree of market efficiency'. Briefly explain the three level of market efficiency.