Apple Ltd. and Banana Ltd. have been paying a dividend of ₹64 per share each year to their shareholders. Beta coefficient of these two companies is 1.25 and 1.40 respectively. If the risk free return is 6% and market ret

Applying CAPM formula, Rₐ = R f + β (R m - R f ) where, Rₐ = Expected Rate of Return R f = Risk free rate of Return β = Risk Factor R m = Market Return The expected returns of Apple and Banana Ltd. are as under: Apple Ltd. Banana Ltd. Applying CAPM Rₐ = 6 + 1.25 (10-6) = 11% Rₐ = 6 + 1.4 (10-6) = 11.6% Prediction about share price (P) If Kₑ = D/P Then P = D/Kₑ = 64/0.11 = ₹581.82 If Kₑ = D/P Then P = D/Kₑ = 64/0.116 = ₹551.72