Franklin Corporation is expected to pay a dividend of $1.25 per share at the end of the year (D1= $1.25). The stock sells for $41.00 per share, and its required rate of return is 10.5%. The dividend is expected to grow at some constant rate, g, forever. What is the equilibrium expected growth rate?

Select the correct answer.

a. 7.70%b. 7.45%c. 7.20%d. 6.95%e. 7.95%