Last year, when the stock of Waldo, Inc., was selling for $28 a share, the dividend

yield was 3.5 percent. Today, the stock is selling for $35 a share. What is the required

return on this stock if the company maintains a constant dividend growth rate of 5

percent?

a. 7.94 percent

b. 8.28 percent

c. 8.72 percent

d. 8.78 percent

e. 8.93 percent