MSFT has a beta of .93, last year's dividend was $2.75 and next year's will be $3.00. the stock price is $245 and analysts forecast a price $285 a year from now.

MMM has a beta of 1.09, last year's dividend was $6.00 and next year's will be $6.50. the stock price is $127 and analysts forecast a price of $145 a year from now.

The market return is 12.5% and risk free rate is 2.3%.

1. Calculate the expected return of both MSFT and MMM.

2. Using the expected return and the expected payment of next years dividend, calculate the expected stock price on year from now for both MSFT and MMM.

3. Compare the CAPM calculated stock price (from #2 above) with the analyst's forecast. Would you recommend that an investor buy or sell short either stock? Why?