The following information is relevant for answering the questions that follow:
Risk-free rate of return = 8%
Expected return of the market portfolio = 12%
a.??????Find out the required rate of return of the common shares of Beximco Pharmaceutical Limited if the beta of the share is 1.3.
b. Given the risk-free rate of return and expected return of the market portfolio mentioned above, calculate the beta of a stock if its required rate of return is 18%.
4.??????A company has just paid Tk. 20 as common dividend. Dividends are paid annually. The dividends of the company are expected to grow at a constant rate of 8% per year forever.
a.??????Find out the dividends the company is expected to give in Year 2 and Year 4.
b.??????Find out the intrinsic value of the share of common stock of the company today if the required rate of return on the common stock is 15%.
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