Answer: 9.08%
Explanation:
Using the Gordon Growth model, a required return on a stock can be calculated if the stock price, next dividend and constant growth rate is given.
Stock Price = [tex]\frac{Next Dividend}{Required return - growth rate}[/tex]
37 = [tex]\frac{1.88}{r - 0.04}[/tex]
37(r - 0.04) = 1.88
r - 0.04 = 1.88/37
r = 1.88/37 + 0.04
r = 9.08%
