The following select information relates to Giant Enterprises, a leader in the manufacture of chemical products.

1. Risk and Return

The company has a beta of 1.20, the risk-free rate of return is currently 10%, and the market return is 14%. The company plans to pay a dividend of $2.60 in the coming year and anticipates that its future dividends will increase at an annual consistent of 6% for the forseeable future.

Required:

a) Calculate the required return on the companys ordinary shares using the Capital Asset Pricing

Model (CAPM).

b) Estimate the value of the companys ordinary shares using the Constant-Growth Dividend Model

(Use the required rate of return calculated in part (a)