Answer:
6.81%
Explanation:
KellyAnne public relation just paid an annual dividend of $1.27 on common stock and it increase by 3.4 percent annually
The first step is to calculate next year dividend
= 1.27 + 1.27 × 3.4/100
= 1.27 + 1.27 × 0.034
= 1.27 + 0.04318
= 1.3132
Therefore the required rate on the stock can be calculated as follows
Required rate of return - 3.4%= 1.3132/38.56
= Required rate of return -3.4%= 3.41%
Required rate of return= 3.41% + 3.4%
= 6.81%
Hence the required rate of return on the stock is 6.81%
