1. Consider the following figures pertainig to risk free rate, market rate and return rate of a…

1.       Consider the following figures pertainig to risk free rate, market rate and return rate of a security of A Ltd during the last 6 years. On the basis of the above information, you are required to determine the cost of equity capital in the context of CAPM. Past data may be taken as proxy for the future.

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2.       Investors require a 12 per cent rate of return on equity shares of company Y. What would be the market price of the shares if the previous dividend (D0) was Rs 2 and investors expect dividends to grow at a constant rate of   (a) 4%   (b) 0%   (c) –4%   (d) 11%   (e) 12% and   (f) 14%?