This one’s a little harder. Suppose the current share price for the firm in the previous problem is $104.05 and all the dividend information remains the same. What required return must investors be demanding on Warf stock?

Data from problem 21

Warf Co. just paid a dividend of $4.00 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, after which the company will keep a constant growth rate, forever. If the required return on Warf stock is 13 percent, what will a share of stock sell for today?