Posted: September 10th, 2023

Contrary to the conservative securities analysts, Mr. Stephens feels that the company could maintain a constant annual growth

Contrary to the conservative securities analysts, Mr. Stephens feels that the company could maintain a constant annual growth rate in dividends per share of 11.5% in the future, or possibly 15% for the next 2 years and 11.5% thereafter. Mr. Stephens based his estimates on an established long-term expansion plan throughout the United States, Canadian and Mexican markets. Venturing into these markets was expected to cause the risk of the firm, as measured by the beta on its stock, to increase immediately from 1.1 to 1.5. c. (1) What is the current required return for Soda Pop stock (use CAPM)? (please show formulas and work) (2) What will be the new required return for Soda Pop stock assuming that they expand into Other States, Canadian, and Mexican markets as planned (use CAPM)? (please show formulas and work) D. If the securities analysts are correct and there is no growth in future dividends, what will be the value per share of the Soda Pop stock? ( Note: use the new required return on the company’s stock here) Data item 2015 – Research Paper Writing Help Service value Earnings per share (EPS) $8.26 Price per share of common stock $104.25 Book value of common stock equity $325,000,000 Total common shares outstanding 8,300,000 Common stock dividend per share $4.05 Data Points Beta, b Required Return, K 0 2.25% .25 4.600% .5 6.950% .75 9.300% 1 11.650% 1.25 14.000% 1.5 16.350% 1.75 18.700% 2.0 21.050%

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