Walter Utilities is a dividend-paying company and is expected to pay an annual dividend of $0.65 at the end of the year. Its dividend is expected to grow at a constant rate of 9.00% per year. If Walters stock currently trades for $16.00 per share, then the expected rate of return on the stock is

a) 11.10%

b) 9.14%

c)16.98%

d)13.06%

Which of the following conditions must hold true for the constant growth valuation formula to be useful and give meaningful results?

The companys stock cannot be a zero growth stock.

The companys growth rate needs to change as the company matures.

The required rate of return, rs

, must be greater than the long-run growth rate.