Problem:
The dividend yield on Alpha's common stock is 5.2%. The company just paid a $2.10 dividend. The rumor is that the dividend will be $2.3 next year. The dividend growth rate is expected to remain constant at the current level.
Required:
Question: What is the required rate of return on Alpha's stock?
- 14.70%
- 12.31%
- 18.29%
- 20.01%
- 24.21%
Note: Show all workings.