In this economic, all market participants agree with evaluating each company's risk by using CAPM. market portfolio's expected rate of return is 13%. company HP's beta is 0.8. this company's annual earning per share is $3, inclination for dividend is 100%. earning per share's rate of increase is 0, risk free rate of interest is annual 3%.
1) what is company HP's annual expected rate of return?
2) what is intrinsic value of company HP which based on dividend discount model?
3) company HP find new investment opportunity. so company announced that reinvestment rate will be 50% in the market. with announcement, stock price increased to $60. under the this information, what is ROE of new investment project? (suppose dividend of this year already paid before announcement, and effect of new investment project will be continued forever)
4) if stock price is equal to q2)'s intrinsic value, what is ROE of the new investment project? explain the reason why stock price is not changed after new dividend policy.
please answer the question legible