Sports Authority Inc. has just paid a cash dividend, D₀, of $2.00 per share. Investors require a return, k, of 12.0% from investments such as this. Use this information to answer the next two questions. Question 1: If the dividend is expected to grow at a constant rate, g, of 4.0% per year, then find the current value, P₀, of a share of stock using the dividend discount model (DDM). Show your work. Hint: P₀ = D₁/(k-g) and

D₁ = D₀ (1+g). Check figure: P₀ = $26.00. Question 2: Estimate what P₅, the value a share of stock five years from now, will be. Show your work.

Hint: P₅ = P₀ (1+g)⁵. Question 3: Assume that the risk-free rate is 4.5%, the market return is 10.5%, and the return on stock W is 12.5%. Using the CAPM, determine the beta coefficient for stock W. Show your work. Question 4: An investment fund consists of four stocks with the following investments and betas: Stock A: $400,000 +1.50 Stock B: $600,000 -0.50 Stock C: $1,000,000 +1.25 Stock D: $2,000,000 +0.75 Calculate the portfolio beta for this investment fund. Show your work. Check figure: Portfolio beta = 0.7625.