The following data represent total assets, book value of common shareholders' equity, and market value of common shareholders' equity (dollar amounts in millions) for Microsoft, Intel, and Dell. These data also include market betas for these three firms and analysts' consensus forecasts of net income and earnings per share. Assume that for each firm, net income and comprehensive income will be identical. Assume that the risk-free rate of return is 3.0% and the market risk premium is 5.0%.

	Microsoft	Intel	Dell
Total Assets	$108,704	$71,119	$44,533
Common Equity:
Book Value	$57,083	$45,911	$8,917
Market Value	$248,510	$131,260	$22,270
Market Beta	1.00	1.12	1.28
Analysts' Consensus Forecasts of Net Income	$22,848	$12,575	$3,432
Analysts' Consensus Forecasts of EPS	$2.72	$2.50	$1.95

Required

a. Using the CAPM, compute the required rate of return on equity capital for each firm.

Microsoft	Intel	Dell

b. Project required income for each firm.

Microsoft	Intel	Dell

c. Project residual income for each firm.

Microsoft	Intel	Dell