Assuming the current market price of the stock reflects

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The stock of Nogro Corporation is currently selling for $25 per share. Earnings per share in the coming year are expected to be $2. The company has a policy of paying out 40% of its earnings each year in dividends. The rest is retained and invested in projects that earn a 8% rate of return per year. This situation is expected to continue indefinitely.

Assuming the current market price of the stock reflects its intrinsic value as computed using the constant-growth DDM, what rate of return do Nogro’s investors require? (Do not round intermediate calculations.)

Required Return=

Reference no: EM131333494

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