P0 = D (1+g) / (r-g)
then sub in your values:
22.35 = 1.98 / r - 0.075
22.35 (r - 0.075) = 1.98
r - 0.075 = 1.98 / 22.35
r - 0.075 = 0.0886
r = 0.0886 + 0.0750 = 0.1636 = 16.36%
Proxicam, Inc., is expected to grow at a constant rate of 7.50 percent. If the company’s next dividend, which will be paid in a year, is $1.98 and its current stock price is $22.35, what is the required rate of return on this stock? (Round intermediate calculations to 4 decimal places, e.g. 1.5325 and final answer to 2 decimal places, e.g. 17.54%.)
