To calculate the required rate of return for the stock, we can use the Gordon Growth Model (also known as the Dividend Discount Model for a stock with constant growth). The formula for the required rate of return (\( r \)) is:
\[ r = \frac{D_1}{P_0} + g \]
Where:
- \( D_1 \) = Dividend expected next year
- \( P_0 \) = Current market price of the stock
- \( g \) = Growth rate of the dividend
Given:
- \( D_1 = 3.65 \)
- \( P_0 = 32.68 \)
- \( g = 4.24% = 0.0424 \)
Now, we can substitute the values into the formula:
\[ r = \frac{3.65}{32.68} + 0.0424 \]
First, calculate \( \frac{3.65}{32.68} \):
\[ \frac{3.65}{32.68} \approx 0.111 \]
Now add the growth rate:
\[ r \approx 0.111 + 0.0424 = 0.1534 \]
To express this as a percentage:
\[ r \approx 15.34% \]
Thus, the required rate of return for the stock is approximately 15.34%.