Answer:
9.21%
Explanation:
To calculate this, we use the formula for the dividend discount model as follows:
P = D/(r - g) ............................ (1)
Where,
P = current stock price = $33
D = Next dividend = $1.72
r = required return = ?
g = growth rate = 4% = 0.04
Substituting the values into equation (1) and solve for r, we have:
33 = 1.72/(r - 0.04)
33(r - 0.04) = 1.72
33r - 1.32 = 1.72
33r = 1.72 + 1.32
33r = 3.04
r = 3.04/33
r = 0.0921, or 9.21%
