The next dividend payment by Halestorm, Inc., will be $1.76 per share. The dividends are anticipated to maintain a growth rate of 7 percent forever. If the stock currently sells for $34 per share, what is the required return

12.18%

Explanation:

From the question the next dividend payment that will be made by Halestorm Inc. will be $1.76 per share

This dividend payment is expected to have a growth rate of 7% forever

= 7/100

= 0.07

Since the current stock sells for $34 per share then the required rate of return can be calculated as follows

R = (D1/Po) + g

R = required rate of return

D1 = dividend payment

Po = Current price of stock

R = ($1.76/$34) + 0.07

R = 0.05176 + 0.07

R = 0.1218*100

R = 12.18%

Hence the required rate of return is 12.18%