Question three:

On the basis of an analysis of past returns and of inflationary expectations, Marta Gomez feels that the expected return on stocks in general is $12$ percent. The risk$-$free rate on short$-$term. Treasury securities is now $7$ percent. Gomez is particularly interested in the return prospects for Kessler Electronics Corporation. Based on monthly data for the past five years, she has fitted a characteristic line to the responsiveness of excess returns of the stock to excess returns of the S&P $500$ Index and has found the slope of the line to be $1\mathrm{.}67.$ If financial markets are believed to be efficient, what return can she expect from investing in Kessler Electronics Corporation?

If Kessler Electronics pays dividend next year of $$2\mathrm{.}60$ per share and growing at constant rate of $4\%,$ what would be the value of Kessler Electronic per share?