TPP Inc., which owns and operates a chain of tattoo and piercing parlors, was founded 10 years ago. It has been profitable for the last 5 years, but it has needed all of its earnings to support growth and thus has never paid a dividend. Management has indicated it plans to pay $0.40 dividend 2 years from today, then to increase it at a relatively rapid rate for several years and then to increase it at a constant rate of 3.0% thereafter, as shown in the table below. Managements credibility with investors is high and it is believed the current price of the stock, $19, represents fair value i.e. - the market price is equal to its intrinsic value, or is in equilibrium. What is the expected rate of return on the common stock?

Year	0	1	2	3	4	5	6	7	8
Growth Rates				25.00%	20.00%	15.00%	10.00%	6.50%	3.00%

a. 5.00%

b. 6.16%

c. 6.34%

d. 6.27%

e. 7.54%