Answer: 8.52%

### Explanation The Gordon growth model formula is: \[ V_0 = \frac{D_1}{r - g} \] Where: - \( V_0 \) is the current stock value ($92). - \( D_1 \) is the next year's dividend, calculated as \( D_0 \times (1 + g) \). - \( r \) is the required return. - \( g \) is the dividend growth rate (4%). To solve for \( r \), rearrange the formula: \[ r = \frac{D_1}{V_0} + g \] Substitute the given values: \[ D_1 = 4 \times (1 + 0.04) = 4.16 \] \[ r = \frac{4.16}{92} + 0.04 = 0.0452 + 0.04 = 0.0852 \text{ or } 8.52\% \] **Why the other options are incorrect:** - **Option A (8.35%)**: Incorrectly uses \( D_0 \) instead of \( D_1 \). - **Option C (9.44%)**: Incorrectly uses \( E_0 \) (current EPS) instead of \( D_1 \).

Author: LeetQuiz Editorial Team