1. HR Industries (HRI) has a beta of 1.3, while LR Industries's (LRI) beta is 1.0. The risk-free rate is 6%, and the required rate of return on an average stock is 13%. The expected rate of inflation built into rRF falls by 1.5 percentage points; the real risk-free rate remains constant; the required return on the market falls to 10.5%; and all betas remain constant. After all of these changes, what will be the difference in the required returns for HRI and LRI? Round your answer to two decimal places. %
2. Financial analysts forecast Wal-Mart Stores (WMT) growth for the future to be 13.00 percent. Their recent dividend was $2.23. What is the value of their stock when the required rate of return is 17.00 percent?