GivenGiven:Builtrite’s common stock is currently selling for $86 a share, and the firm just paid an annual dividend of $3.70 per share. Management believes that dividends and earnings should grow at 7% annually.The value of the firm’s stock (Po) can be determined using the Gordon growth model.Po = Do * (1 + g) / (r - g)Where:Po = stock priceDo = most recent dividendg = expected annual dividend growth raterr = required rate of return on stockThus, using the given information, we have:Po = $3.70 * (1 + 7%) / (r - 7%)Po = $3.70 * 1.07 / (r - 0.07)Po = $3.959 / (r - 0.07)We also know that the current market price of the stock is $86. Therefore:Po = $86Using the above equation we get,$86 = $3.959 / (r - 0.07)Solving for r, we get:r = 13.22%Hence, the required rate of return on the stock (r) is 13.22%.