The share price of a company is 200p. Its expected next dividend is 5p. The dividend (and share price) growth rate is expected to be 4% p.a. The risk-free interest rate is 4.5% p.a. The share has a beta of 1.2 and the expected rate of return on the stock market as a whole is 8.5% p.a.

(a) Estimate the expected (forecast) rate of return on the share.

(b) Estimate the required rate of return.

(c) Consider whether the share is suitable for purchase.