Northern Train Corp is expected to pay a dividend of $7 in the coming year. Dividends are expected to grow at the rate of 15% per year. The risk-free rate of return is 6%, and the expected return on the market portfolio is 14%. The stock of Northern Train Corp has a beta of 3.00. The return you should require on the stock is

Question

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30%The required return on the stock can be calculated using the Capital Asset Pricing Model (CAPM), which is given by the formula: Required Return = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate). Plugging in the values: Required Return = 6% + 3 * (14% - 6%) = 6% + 3 * 8% = 6% + 24% = 30%.

Northern Train Corp Is Expected to Pay a Dividend of $7