River Co Just Paid a Dividend of $2 Per Share Out

Multiple Choice

River Co. just paid a dividend of $2 per share out of earnings of $4 per share. If its book value per share is $25 and its stock is currently selling for $40 per share, calculate the required rate of return on the stock.

A) 15.2 percent
B) 7.2 percent
C) 14.7 percent
D) 13.4 percent