The following is from Warren Buffett's 1991 Berkshire Hathaway shareholder letter- A few years ago, the conventional wisdom held that a newspaper, television or magazine property would forever increase its earnings at 6% or so annually and would do so without the employment of additional capital, for the reason that depreciation charges would roughly match capital expenditures and working capital requirements would be minor. Therefore, reported earnings were also freely-distributable earnings, which meant that ownership of a media property could be construed as akin to owning a perpetual annuity set to grow at 6% a year. Say, % was used to determine the present value of that earnings stream. One could then calculate that it was appropriate to pay a whopping next, that a discount rate of (a) S(b)million for a property with [next periodj] after-tax earnings of $1 million." a) Let us first figure out a discount rate for blank (a) above. In the original text, Buffett just asserts a discount rate, so we don't know exactly how he arrived at his number. Though Buffett himself wouldn't do it this way, for sake of argument, say you use the CAPM. Let the risk-free rate be 1%, the beta be 1.5, and the market risk premium be 6%. What is the expected return? Please show your work (it can be short, just do more than write a single number). Use this as the discount rate. If you are unable to solve this part, use a discount rate of 11% for the subparts below