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Measure the growth rate

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A company is expected to pay its first dividend in the amount of $2 a share 7 years from today. The dividend in year 8 will be $2.25 a share and the dividend in year 9 will be $2.50 a share, after which a constant annual growth in dividends is expected. The appropriate annual discount rate of the company's stock is 11%. If the company's stock is selling for $38.10 a share, what is the annual growth rate expected by investors in the company's dividends after year 9? (Use 5 decimals in calculations to measure the growth rate more precisely.)

Reference no: EM133121705

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