Answer: annual growth rate in dividends is assumed to be _7.60__%

Working notes for the above answer is as under

We have been provided with the information ,that

A stock’s dividend is expected to be $2.55 next year

expected to grow at a constant rate per year indefinitely.

Its Beta is 1.

B =1

The risk-free rate is estimated to be 6%,

Rf = 0.06

and the Market Risk Premium is expected to be 6%.

(RM-RF)=0.06

If the stock’s current price is $58

Now we put all this figure in to the CAPM formulla as follow

E(ri) = Rf +B (Rm-Rf)

E(ri) =0.06 +1 ( 0.06)

E(ri) =0.06+0.06

E(ri) =0.12

E(ri)=12%

Now Formulla of current price of the share is as follow

P0 = D1 / (Er-g)

58 =2.55 /( 0.12 -g)

Solving this equation we will get

g =0.076034

g=7.60 %