We have the price and dividend. We need the required rate of return to use the Gordon Growth model to calculate implied dividend growth. Using the capital asset pricing model, the required return = risk-free rate + (beta × equity risk premium) = 17.72%.
Price = [dividend × (1 + dividend growth rate)] / [required return − growth rate]
18.12 = [0.32 × (1 + dividend growth rate)] / [0.1772 − dividend growth rate]
18.12 × [0.1772 − dividend growth rate] = 0.32 + 0.32 × dividend growth rate
3.2112 − 18.12 × dividend growth rate = 0.32 + 0.32 × dividend growth rate
2.8912 = 18.44 × dividend growth rate
1 = 6.3779 × dividend growth rate
Dividend growth rate = 15.68%
