Marcus Isherwood's firm requires all its analysts to use a dividend discount model (DDM) and the capital asset pricing model (CAPM) to value dividend-paying stocks. Using DDM and CAPM, Isherwood must now value Blood Pressure Ltd.
Blood Pressure Ltd. characteristics
Beta 1.50
This year’s dividend $ 0.45
risk-free rate 2.00%
Expected market return 9.50%
Calculate the required rate of return for Blood Pressure.