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Unformatted text preview: halfway down the left hand side of the page. Dow Chemical Co. (DOW) Beta = 0.8 Assuming that: Rf = 4% Rm = 12% In 2001 Dow Chemical paid a dividend of $1.29 per share, and in 2007 they paid $1.63 per share, while the forecast for 2008 is 1.68 but since there is still some time left in 2008, we cannot base our calculations on the forecasted figures. Solution Using CAPM: R f = 4% R m = 12% Beta = 0.8 Since: ( ) E f m f R R R R = +-Where RE is the Rate of Return on Stock 4 0.8(12 4) E R = +-= 10.4% Growth rate (g) = 3.98% (Please see the attached excel sheet for the calculations) 1 D P r g =-= $1.68 0.104 0.0398-= $26.17...
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- Spring '11