Question: Mega is a limited company whose only asset is a fully diversified stock portfolio with a beta of 1. CAPM applies with risk-free borrowing and

Mega is a limited company whose only asset is a fully diversified stock portfolio with a beta of 1. CAPM applies with risk-free borrowing and lending available to all investors at 5%. The market risk premium is 15%. The current market value of Mega is Sh 80.Investors expect Mega to be worth Sh 90 in one year, right after dividends have been paid to shareholders.

REQUIRED

If the CAPM applies, what dividend yield is expected from Mega

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