Estee Lauder's Upcoming Dividend Is Expected to Be $0

question 3

Multiple Choice

Estee Lauder's upcoming dividend is expected to be $0.65 and its stock is selling at $45. The firm has a beta of 1.1 and is expected to grow at 10 percent for the foreseeable future. Compute Estee Lauder's required return using both CAPM and the constant growth model. Assume that the market portfolio will earn 11 percent and the risk-free rate is 4 percent.

• A) CAPM: 11.2 percent; Constant Growth Model: 10.97 percent
• B) CAPM: 11.7 percent; Constant Growth Model: 11.44 percent
• C) CAPM: 10.1 percent; Constant Growth Model: 11.46 percent
• D) CAPM: 9.2 percent; Constant Growth Model: 9.56 percent

---

Definitions:

Brain Drain

The phenomenon of skilled professionals emigrating from one country to another, often in search of better opportunities.

Cash Welfare Payments

Government-provided financial assistance to individuals or families, often aimed at reducing poverty.

Immigrants

Individuals who move from one country to another for the purpose of settling or residing there, often in search of a better life or opportunities.

Industrial Country

A nation with a significant portion of its economy based on manufacturing and industry, often characterized by a high standard of living and advanced technological infrastructure.