QUESTION 33 The following information relates to Bobby plc: Current share price $ 1.50 Expected dividend per share 20 pence Forecast dividend growth per annum 4% Share beta 1.5 Return on gilts 4.5% Return on market portfolio 8% Required: (a) Calculate the cost of equity for Beby.plc, using (i) the dividend growth model and (ii) the CAPM (capital asset pricing model). (6) Explain why these approaches give different results. Your answer should outline the main simplifying assumptions made in each case and discuss the key strengths and limitations of each method. 1