1. Elves Corporation has just paid a dividend of $1.25. Dividends are expected to grow at 15% for years 1-3, 30% for years 4-6, 10% for years 7-8, and 4% thereafter. What should the stock sell for today if the required return is 16 percent?
(PLEASE SHOW STEPS) (NO EXCEL)
2. According to the CAPM, what is the expected market return given an expected return on a security of 17.2%, a stock beta of 1.6, and a risk-free interest rate of 6%?