Todd Mountain Development Corporation Is Expected to Pay a Dividend

question 11

Multiple Choice

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 stock of Todd Mountain Development Corporation has a beta of 0.75. Using the CAPM, the return you should require on the stock is ________.

• A) 7.25%
• B) 10.25%
• C) 14.75%
• D) 21%

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