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Compute the required return for an investment

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Reference no: EM133004695

Target stock is currently selling for $175.40 a share. It is expected to reach a price of $188.20 a year from now. You expect the company to pay a dividend of $2.72 in the next year and the stock's beta is 0.98. The risk-free rate of return is 4.5% and the market rate of return is 11.5%. CAPM states that: RR = RF + β(RM - RF).

b. Compute the required return for an investment in Target stock. [Show answer to 2-decimal places] [Hint: returns are in percentages] and please show how you did it.

Reference no: EM133004695

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