Homework Answers
Stock price=(Dividend this year)&(1+Growth rate)/(Required
rate of return-Growth rate)
Suppose the required return be r%, now substituting the values, we
get;
22.5=.52*(1+7%)/(r-7%)
=>r-7%=.52*(1+7%)/22.5
r=.52*(1+7%)/22.5+7%=0.094728889 or 9.47% (Rounded to two decimal
places)
The closest option available is 9.45%
Answer: Option c is correct
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