You are a portfolio manager and you are considering placing the best one of three stocks into your portfolio. Given the following data which stock would you select? Explain your selection. First, you will need to calculate the dividend growth rate and use this rate as the earnings growth rate in calculating the CAPM for each stock. You will also need to use the required rate of return as the alternative available rate in calculating the CAPM. Remember that you must first calculate the discount rate before calculating the CAPM.
Stock A Price: $36.00 Beta: .95 Required rate of return: 11%
Stock B Price: $33.00 Beta: 1.2 Required rate of return: 11%
Stock C Price: $105.00 Beta: 1.75 Required rate of return: 11%