ABC Corporation stock is currently selling for $64.00. The stock is expected to pay a dividendof $5.75 at the end of the year. Dividends are expected to grow at a constant rate of 8.5% indefinitely. Compute the expected rate of return on ABC Corporation stock. Submit your answer as a percentage and round to two decimal places.

To answer the question:

(1) Describe and interpret the assumptions related to the problem.

(2) Apply the appropriate mathematical model to solve the problem.

(3) Calculate the correct solution to the problem.