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Question 1 (a): META Co. has just paid a dividend of 0.07$ or 7% per share. An investment analyst estimates that the growth in dividends

Question 1 (a):

META Co. has just paid a dividend of 0.07$ or 7% per share. An investment analyst estimates that the growth in dividends will be the equivalent of 4% per year. The estimated return for a share of that risk class is 11%.

What is the value of the share according to the constant growth model?

Question 1 (b):

LEX Company has a beta of 1.80. The risk-free rate of return is 1.70 percent and the market rate of return is 6.50 percent.

What is the CAPM cost of equity?

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