Answer:
10.95%
Explanation:
Given;
Selling cost of the common stock, P₀ = $36.84
Market rate of return, r = 15.8%
Annual dividend, D₀ = $1.61
Now, we have the relation
[tex]P_0=\frac{D_0\times(1+g)}{r-g}[/tex]
here, g is the dividend growth rate
on substituting the respective values, we get
[tex]36.84=\frac{1.61\times(1+g)}{0.158-g}[/tex]
or
5.82072 - 36.84g = 1.61 + 1.61g
or
38.45g = 4.21072
or
g = 0.1095
or
g = 10.95%
