Answer:
13.5%
Explanation:
market rate of return can be calculated with below expresion
Current Price = D / (K - g)
Where
Current Price = $22 a share
D= Dividend in coming Year
dividend = $2.42
K= rate of return
g =growth rate
22 = 2.42 / (K - 0.025)
Cross multiply we have
22(K - 0.025)= 2.42
Open the bracket we have
22k- 0.55=2.42
2.42 + 0.55= 22k
K = 2.97 / 22
= 0.135
= 0.135×100%
= 13.5%
Therefore, the market rate of return if this stock is currently selling for $22 a share is 13.5
