Todd Mountain Development Corporation Is Expected to Pay a Dividend

Todd Mountain development Corporation is expected to pay a dividend of $2.50 in the upcoming year. Dividends are expected to grow at the rate of 8% per year. The risk-free rate of return is 5% and the expected return on the market portfolio is 12%. The shares of Todd Mountain Development Corporation have a beta of 0.75. Using the CAPM, the return you should require on the shares is ________.

A) 7.25%
B) 10.25%
C) 14.75%
D) 21.00%

Correct Answer:

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