This one’s a little harder. Suppose the current share price for the firm in the previous problem is $63.82 and all the dividend information remains the same. What required return must investors be demanding on Holyrood stock? Set up the valuation formula with all the relevant cash flows, and use trial and error to find the unknown rate of return.

Data from previous problem

Holyrood Co. just paid a dividend of $2.45 per share. The company will increase its dividend by 20 percent next year and will then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent dividend growth, after which the company will keep a constant growth rate forever. If the required return on Holyrood stock is 11 percent, what will a share of stock sell for today?