Waterworks has a dividend yield of 10.50%. If its dividend is expected to grow at a constant rate of 7.50%,

Waterworks has a dividend yield of 10.50%. If its dividend is expected to grow at a constant rate of 7.50%, what must be the expected rate of return on the company’s stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Expected rate of return

%

Explanation:

r = DIV1/P0 + g = 10.50% + 7.50% = 18.00%