The Gecko Company and the Gordon Company are two firms that have the same

business risk but different dividend policies. Gecko pays no dividend, whereas Gordon

has an expected dividend yield of $2\mathrm{.}9$ percent. Suppose the capital gains tax rate is zero,

whereas the income tax rate is $35$ percent. Gecko has an expected earnings growth rate

of $11$ percent annually, and its stock price is expected to grow at this same rate. The

aftertax expected returns on the two stocks are equal $($because they are in the same risk

class$).$

What is the pretax required return on Gordon's stock? $($Do not round intermediate

calculations and enter your answer as a percent rounded to $2$ decimal places, e$.$g$.,$

$32\mathrm{.}16.)$

Answer is complete but not entirely correct.

Pretax return