For five telecom stocks, the table below provides the expected dividend for next year, the...
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Accounting
For five telecom stocks, the table below provides the expected dividend for next year, the current market price, the expected dividend growth rate, and the beta. The risk-free rate is currently 5.2%, and the market risk premium is 6.1%.
| Stock | Dividend | Price | Dividend Growth Rate | Beta |
| Stock 1 | 2.2 | 50.32 | 3 | 1.2 |
| Stock 2 | 3.1 | 35.8 | 5 | 0.85 |
| Stock 3 | 1.85 | 46.2 | 3.5 | 1.2 |
| Stock 4 | 0.95 | 33.69 | 4.5 | 0.95 |
| Stock 5 | 3.1 | 61.2 | 6 | 0.74 |
i) Calculate the expected rate of return for each stock using the Gordon growth model.
ii) Calculate the required rate of return for each stock using the CAPM.
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