Problem: DavidLee Co is a software development company that headquarters in Toronto and covers Canada, the United States, Japan, and Europe. The followings are the summary of the information for the stock of this company and the market.
Stock price today = $65 per share
Stock's beta = 1.35
Dividend payment = $4 per share per year
Treasury bill rate = 4%.
Market rate of return = 12%.
a. Use the CAPM to calculate the cost of equity for this stock
b. Compute the expected price level of this stock a year later.