The stock price of Webber Co. is $68. Investors require an 11 percent rate of return on similar stocks.

Required: If the company plans to pay a dividend of $3.85 next year, what growth rate is expected for the company's stock price?

To get the growth rate, we will follow the Gordon Growth modelP = D / (K-G) whereP = stock value=$68D = Expected dividend=$3.85G = Growth rateK = required rate of returnG = K - (D/P) Substitute the given valuesG = 0.11 - (3.85/68)

G = 5.34%The growth rate for stock required is 5.34%