IBM's Stock Price Is $22, It Is Expected to Pay

Multiple Choice

IBM's stock price is $22, it is expected to pay a $2 dividend, and analysts expect the firm to grow at 10 percent per year for the next five years. TDI's stock price is $10, it is expected to pay a $1 dividend, and analysts expect the firm to grow at 12 percent per year for the next five years. What is the difference in the two firms' required rates of return?

A) 2.91 percent
B) 1.82 percent
C) 2.03 percent
D) 3.23 percent