Swords Enterprise dividend has been growing at a rate of 25% and it is expected to grow at the same rate for the next two years. After that, Swords Enterprise dividend growth is expected to stay at the rate of 3% perpetually. The company beta is 1.6, the market risk premium is 5%, and the risk-free rate is 3%. It just paid a dividend of $2.00 per share recently.

1. If the required rate of return on the market portfolio is increased by 2%, what is the required rate of return on Swords Enterprises stock?