The current dividend yield on CJ's common stock is 1.89 percent. The company just paid a $1.23 annual dividend and announced plans to pay $1.37 next year. The dividend growth rate is expected to remain constant at the current level. What is the required rate of return on this stock?

The required rate of return on this stock is 13.27%

Explanation:

The computation is shown below:

First, we have to determine the dividend growth and then the growth rate. Afterward, the final answer will come

Dividend growth rate = Next year dividend - current year dividend

= $1.37 - $1.23

= $0.14

Now the growth rate would be equal to

= (Dividend growth) : (current year dividend)

= ($0.14) : ($1.23)

= 11.38%

Now add the dividend yield to the growth rate

So, the required rate of return would be

= 11.38% + 1.89%

= 13.27%