Using Yahoo market data:

4. The actual expected return on a stock based on estimates of future dividends and future price can be compared to the required or equilibrium return given its risk. If the expected return is greater than the required return, the stock may be an attractive investment.

a. First calculate the expected holding-period return (HPR) on Target Corporations stock based on its current price, its expected price, and its expected dividend.

i. Get information for Target (enter TGT under quote search). From the Analyst Opinion page, find the range for estimated target price for the next fiscal year.

ii. Collect information about todays price and the dividend rate. What is the companys

expected dividend in dollars for the next fiscal year?

iii. Use these inputs to calculate the range of Targets HPR for the next year.

b. Calculate the required return based on the capital asset pricing model (CAPM).

i. Use a risk-free rate from Yahoos Market Data page.

ii. Use the beta coefficient shown in the Key Statistics page.

iii. Calculate the historical return on a broad-based market index of your choice. You

may use any time period that you deem appropriate. Your goal is to derive an estimate

of the expected return on the market index for the coming year.

iv. Use the data youve collected as inputs for the CAPM to find the required rate of

return for Target Corporation.

c. Compare the expected HPR you calculated in part ( a) to the required CAPM return

you calculated in part ( b). What is your best judgment about the stocks current

statusdo you think it is selling at an appropriate price?