Part 1: For this problem assume the following:

(1) the risk-free rate of return = 0.5%

(2) the required return on the market as a whole = 10.0%

(3) the Beta of the Sen Company = 1.0

(4) Sen just paid a dividend = $2.50 per share of common stock

(5) investors expect Sen to increase the dividend by 6% per year over the foreseeable future

A) what is the required return on an investment in Sen common stock?

B) what is your best estimate of the intrinsic value of a share of Sen stock?

C) if the current price of Sen stock = $52.00/share, and you don't own any Sen stock and you are confident of your estimate of its intrinsic value, what should you do?