Your friend would like to seek your advice on investing in Company MC and Company MU. He provides you with the following information. Company Price Earnings Company /share per share beta $5 2 MU DEMC $5 $0.10 $0.50 0.8 Dividend payment $0.30 dividend per share to be paid at the end of this year, and the dividends will grow at 3% annually forever. Pays constant dividends of $0.01 per share annually forever. The long-term return of the ASX200 (i.e. the market portfolio) is 8% p.a., and the market risk premium is 5% p.a. a) Without calculation, use the meaning of Beta identify which company would have a higher expected of return? Explain briefly. b) Using CAPM, calculate the expected rate of return of two companies [4 marks] c) Calculate the implied price or the value of each company's share and identify which share your friend should buy. Explain briefly. d) Use the P/E ratio to identify the cheaper share. [1.5 marks]