Problem:
The common stock of Auto Deliveries sells for $28.16 a share. The stock is expected tp pay $1.35 per share next year when the annual dividen is distributed. The firm has established a pattern of increasing its dividends by 3 percent annually and expects to continue doing so.
Required:
Question: What is the market rate of return on this stock?
Note: Be sure to show how you arrived at your answer.