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AT&T is a mature, established company paying dividends that have consistently increased each year. Its annual dividend is currently $1.64. Assume for this problem that you can earn 3% risk free, and that you expect the overall market to return 15%. AT&T has a beta of 0.80. Use CAPM and the constant growth dividend valuation model to answer the following problems.

a. Find the required return according to CAPM. Do not round.

b. Find the value of AT&T according to the constant growth dividend model, assuming that AT&T dividends will grow at 6% per year, which is the average growth rate of AT&T dividends over the last 10 years.

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