Please answer the green the boxes highlighted and tell me the equation you used to get the answer.

AQ14 fx AD AE AF AG AH AI AU AK AL AM AN AO AP AR 1 2 According to the MRK Data Summary provided: (1) Please calculate the Alpha Value of Merck Stock The current Risk Free Rate = 0.958% The current YTD market return = 8.63% The D1 forward dividend = $2.44 3 4 5 6 = CAPM Equation: Ri 7 = Rf + Beta(Rm - Rf) $81.05 $95.58 8 8 = = 9 9 Ri Rf Rm Beta Expected Return on this Invested Asset Risk-free Rate (from Government Bonds) Market Rate of Return = Beta of Security; Sensitivity of Expected Asset Return to the Expected Market Return 10 11 Today's MRK Stock Price One-Year Target Estimate Risk-Free Rate Market Return Rate Beta /E P/E of MRK P/E of S&P 500 Forward Dividend D1 Company's Revenue Growth Rate 0.958% 8.63% 0.43 17.90 39.81 $2.44 12 = 13 Ri 14 = 15 7.81% 16 HPR (Holding Period Return) 17 = 18 19 20 21 (2) Please answer ...... Alpha Should you buy the MRK Stock today? Why? > 22 23 24 25 AQ14 fx AD AE AF AG AH AI AU AK AL AM AN AO AP AR 1 2 According to the MRK Data Summary provided: (1) Please calculate the Alpha Value of Merck Stock The current Risk Free Rate = 0.958% The current YTD market return = 8.63% The D1 forward dividend = $2.44 3 4 5 6 = CAPM Equation: Ri 7 = Rf + Beta(Rm - Rf) $81.05 $95.58 8 8 = = 9 9 Ri Rf Rm Beta Expected Return on this Invested Asset Risk-free Rate (from Government Bonds) Market Rate of Return = Beta of Security; Sensitivity of Expected Asset Return to the Expected Market Return 10 11 Today's MRK Stock Price One-Year Target Estimate Risk-Free Rate Market Return Rate Beta /E P/E of MRK P/E of S&P 500 Forward Dividend D1 Company's Revenue Growth Rate 0.958% 8.63% 0.43 17.90 39.81 $2.44 12 = 13 Ri 14 = 15 7.81% 16 HPR (Holding Period Return) 17 = 18 19 20 21 (2) Please answer ...... Alpha Should you buy the MRK Stock today? Why? > 22 23 24 25