Question

Asked Dec 6, 2019

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grey manufacturing is expected to pay a dividend of $1.25 per share at the end of the year (D1=$1.25). The stock sells fo $27.50 per share, and its required rate of return is 10.5%. The dividend is expected to grow at some constant rate, g, forever. What is the equilibrium expected growth rate?

Step 1

**Calculation of expected growth rate:**

Hence, the expected growth rate is **5.95%.**

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