Grateway Inc. has a weighted average cost of capital of 11.5 percent. Its target capital structure is 55 percent equity and 45 percent debt. The company has enough retained earnings to finance the capital portion of its capital budget. The pretax cost of debt is 9 percent and the business tax rate is 30 percent. If the expected dividend for the next period (D1) and the current stock price are $5 and $45, respectively, what is the company's growth rate?

Answer rating: 100% (QA)

To calculate the companys growth rate we can use the Gordon Growth Model which relates the expected ... View the full answer