MetaSolar, a VR company, is expected to pay a dividend of $5 per share next year and maintains a constant dividend growth rate of 5% per year forever. The current stock price is $50.

a) Solve for the require rate of return using the dividend growth model (DGM).

b) Assume the market return is 11%, the risk-free rate is 3%, and MetaSolar's beta is 2. Compute the require rate of return using CAPM.

c) Discuss three (3) differences by comparing the methods used in (a) and (b).

Answer rating: 100% (QA)

a To solve for the required rate of return using the dividend growth model DGM we can use the formul... View the full answer