You are a firm believer in the Capital Asset Pricing Model (CAPM). You collected the following information for Firm A and B stocks: - The risk-free rate is 2% - The market risk premium is 6% - Firm A has a CAPM beta of 1.2, just paid an annual dividend of $2 per share, and you believe it's going to continue paying that amount each year forever since it is a "boring" company. - Firm B has a CAPM beta of 2.5, just paid an annual dividend of $1 per share, you believe for the next 5 years its dividend is going to grow by 10% per year (so year 1 dividend is $1.1, year 5 is thus $1 1.1'), but from year 6, its dividend is going to stay constant at its year 5 level forever. Answer the following questions using the dividend discount model. Show your calculations. Hint: think about annuity, perpetuity and general DCFs. Make sure the timing is correct. 1. What is the right price for stock A? 2. What is the right price for stock B?