Calvin received the following research report from an investment consultant. Unfortunately, the beta coefficient for HK

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Calvin Received The Following Research Report From An Investment Consultant Unfortunately The Beta Coefficient For Hk 1 (113.06 KiB) Viewed 113 times

Calvin received the following research report from an investment consultant. Unfortunately, the beta coefficient for HK Speed is not available. Beta Hang Seng Index (HSI) HK Speed Risk-free Rate Expected Return 10% n/a 5% Standard Deviation n/a 25% n/a n/a: data not available Recently, the Chairman of HK Speed has made the following announcement: “From now on, the dividend growth of the company will maintain at a constant rate of 5% per year indefinitely. We foresee the dividend for next year is $1.1 per share.” The closing stock price for HK Speed is $20 on that day. Required (Write the FM equations first in your answers): (a) Using the Dividend Growth Model (DGM), compute the total annual return of HK Speed? (b) Using the CAPM, find the beta coefficient of HK Speed? State any assumption(s) used.