The current price of XYZ stock is $51. Dividends are expected to grow at 7% indefinitely and the most recent dividend was $1. What is the required rate of return on XYZ stock?

A) 9.0%
B) 9.1%
C) 9.3%
D) 10.6%
E) 11.2%

Dividends

Capital paid by a corporation to its shareholders, mostly extracted from the enterprise's earnings.

Required Rate

The minimum return an investor expects to achieve by investing in a project or purchasing an asset, often used in capital budgeting to evaluate potential investments.

Growth Rate

The rate at which a company's sales, earnings, dividends, or other key metrics increase over a specified period of time.