Question 2 The following information is given by your brokerage firm: Nemo Darla Corporation Corporation Corporation 1.15 $30.23 Dory Beta 1.35 $9.67 0.80 $82.04 Market price Currently, the 3-month T-bills rate is 4.5% and the expected rate of return on the market is 14.5%. Assume that the Dividend Discount Model(DDM) and Capital Asset Pricing Model (CAPM) hold for these companies. a) Calculate the required rate of return for the corporations using the CAPM based on the information given. Show your workings. (6 marks) b) You estimates the following dividend growth rate for each of the corporation: 12% per year 9% per year Next two years: Years thereafter: Assuming that the current dividend per share is $1.72, $0.85 and $2.12 for Darla Corporation, Nemo Corporation and Dory Corporation respectively, estimate the intrinsic value for the corporations. Show your workings. (9 marks) c) Recommend which stock is to be invested in by comparing each com intrinsic value with its current market price. (2 marks) d) Explain the difference between the firm-specific risk and the market-related risk. (8 marks)