Gray Manufacturing is expected to pay a dividend of $1.25 per share at the end of the year (D₁ = $1.25). The stock sells for $39.50 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?

Group of answer choices

a) 7.92%

b) 7.41%

c) 5.72%

d) 7.34%

e) 7.04%