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    Rate of Return using SML

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    Millar Motors has a beta of 1.30 and an expected dividend growth rate of 5.00% per year. The T-bill rate is 3.00%, and the T-bond rate is 6.00%. The annual return on the stock market during the past 3 years was 15.00%. Investors expect the annual future stock market return to be 12.00%. Using the SML, what is Millar's required return?

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    Solution Preview

    Millar Motors has a beta of 1.30 and an expected dividend growth rate of 5.00% per year. The T-bill rate is 3.00%, and the T-bond rate is 6.00%. The annual return on the stock market during the ...

    Solution Summary

    Required return has been calculated using SML (Security Market Line) equation.

    $2.19

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