The Required Return for Williamson Heating's Stock Is 12%, and the Stock

The required return for Williamson Heating's stock is 12%, and the stock sells for $40 per share.The firm just paid a dividend of $1.00, and the dividend is expected to grow by 30% per year for the next 4 years, so D₄ = $1.00(1.30) ⁴ = $2.8561.After t = 4, the dividend is expected to grow at a constant rate of X% per year forever.What is the stock's expected constant growth rate after t = 4, i.e., what is X?

A) 5.17%
B) 5.44%
C) 5.72%
D) 6.02%
E) 6.34%

Correct Answer:

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