Question $3$

Gray Manufacturing is expected to pay a dividend of $$1\mathrm{.}25$ per share at the end of the year $(D_1=$$$1\mathrm{.}25).$ The stock sells for $$22\mathrm{.}50$

per share, and its required rate of return is $10\mathrm{.}5\%.$ The dividend is expected to grow at some constant rate, $g,$ forever. What is the

equilibrium expected growth rate?

$5\mathrm{.}88\%$

$4\mathrm{.}25\%$

$4\mathrm{.}30\%$

$4\mathrm{.}90\%$

$4\mathrm{.}94\%$