Equilibrium expected growth rate


Gay Manufacturing is expected to pay a divident of $1.25 per share at the end of the year (D1=$1.25). The stock sells for $21.50 per share and its required rate of return is 10.5%. The divident is expected to grow at some constant rate, g, forever. What is the equilibrium expected growth rate?

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Finance Basics: Equilibrium expected growth rate
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