Notes: market risk premium of 5.5% for T. Bond Rate, and 8.7% for the T. bill rate, and tax of 40% where none is specified.

Q4: You have just done a regression of monthly stock returns of Jordan Electricity Company on monthly market returns over the last five years and come up with the following regression: RIEC=0.84%+1.8 RM The variance of the stock is 45% and the variance of the market is 15%. The current T-bill rate is 5%. The stock is currently selling for JD 12, down JD 3 over the last year, and has paid a dividend of JDO.65 during the last year and expects to pay a dividend of JD 1.20over the next year. Amman Stock Exchange composite has gone down by 6% over the last year, with a dividend yield of 2%. JEC has a tax rate of 40%. a- What is the expected return on JEC over the next year. b-What would you expect JEC price to be in one year from today? C-JEC has JD 120 million in equity and JD 73 million in debt. It plans to issue JD 30 million in new equity and retire JD 40 million in debt. Estimate the new Beta