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Garage, Inc: What is the required return on company stock. Show formula.

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Garage, Inc., is expected to maintain a constant 5 percent growth rate in its dividends, indefinitely. If the company has a dividend yield of 7.5 percent, what is the required return on the company's stock?

What is the formula to solve this?

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The solution displays the formula, the calculations and good explanations.

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Please refer to attached file.

Assuming that the cash dividend payment change at the rate of 5% from one period to the next indefinitely,
D1
P0 = ------------- where P0 = price of ...

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