Franklin Corporation is expected to pay a dividend of $1.25 per share at the end of the year (D1 = $1.25). The stock sells for $32.50 per share, and its required rate of return is 10.5%. The dividend is expected to grow at some constant rate, g, forever. What is the equilibrium expected growth rate?
A. 6.01%
B. 6.17%
C. 6.33%
D. 6.49%
E. 6.65%
Answer: E
Business
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