1. You forecast that Staples will pay a dividend of $3.45 a share at the end of one year.. You estimate that dividends will grow at 4.8% per year on average for the long term. Staples has a beta of .78. You estimate the appropriate risk-free rate to be 3.5%, and the expected return on the market portfolio (proxied by the S&P 500) to be 10% Staples' current price is $88.78 per share

a. What is your estimate of the required return?

b. What is your estimate of the stock's intrinsic value?

c. What is your investment decision?

d. What is the market's required return (market capitalization rate) for Staples?

e. Assume that your required rate of return increases to 11%, all else the same. Will your estimate of the IV be higher or lower than in the original case?

f. What is your new estimate of the intrinsic value?