Estimating the Markets Expected Growth Rate in Dividends

Mattel Inc. was trading at a price of $9.99 per common share at December 31, 2018. Using the Gordon Growth model, estimate the markets expected growth in dividends that is required to yield the $9.99 price per common share. Assume that the current dividend per share is $0.30 and is expected to grow thereafter, and that the cost of equity capital is 12.5%. (Hint: Use the equation for the dividend discount model with increasing perpetuity, at the top of page 12-20.)

Note: Assume current dividend per share is the dividend amount when the constant growth period begins.