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  • Dec 5, 2011, 12:53 PM
    theseusoberon
    Required rate of return
    A corporation just paid a dividend of $3.75 per share. The company will increase its dividend by 15% next year and will reduce its dividend growth by 5% per year until it reaches the industry average of 5%, after which the company will keep a constant growth rate forever. If the share price is 57.25 what required rate of return must investors demand for the stock?

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