Part $2$: $($two paragraphs$)$

Find your company's beta from a credible source.

You can get this information from the Mergent database or by looking it up on a financial website like Yahoo! Finance.

Compare your company's beta to the market beta of $1\mathrm{.}0.$

Calculate the company$-$specific required rate of return using the CAPM formula.

Show all calculations.

Use the beta you determined for your chosen company

Use a risk$-$free rate of $2\mathrm{.}0\%.$

For the market risk premium, use the following assumptions:

For a large capitalization company $($greater than $$10\mathrm{.}0$ billion in market capitalization$)$ use $6\mathrm{.}0\%$ as the market risk premium.

For a mid$-$cap company $($between $$2\mathrm{.}0$ billion and $$10\mathrm{.}0$ billion in market capitalization$)$ use $8\mathrm{.}0\%$ as the market risk premium.

For a small$-$cap company $($less than $$2\mathrm{.}0$ billion in market capitalization$)$ use $11\mathrm{.}0\%$ as the market risk premium.

Compare the company$-$specific required rate of return you calculated to the required return based on size you used in Section $3$: Dividend Analysis and Preliminary Valuation in Week $3$ for the constant growth formula.

Determine whether the company$-$specific required rate of return higher or lower than the rate of return based on size that you used in Section $3$ in Week $3$ for the constant growth formula.

Recall that in the required rate of return $($r$)$ in Week $3$ was assumed to be:

$12\mathrm{.}0\%$ for a large capitalization company.

$15\mathrm{.}0\%$ for a mid$-$cap company.

$18\mathrm{.}0\%$ for a small$-$cap company.

Explain the difference in required rate of returns.