7.12

Constant Dividend Growth Rate, gL Muller's Investigative Services has stock is trading at $50 per share. The stock is expected to have a year-end dividend of $2 per share (D1=$2), and it is expected to grow at some constant rate, gL, throughout time. The stock's required rate of return is 12% (assume the market is in equilibrium with the required return equal to the expected return). What is your forecast of gL? Do not round intermediate calculations. Round the answer to two decimal places. %