Deriving Growth rate

The dividend growth rate is relevant either for calculating the cost of equity (if you are told the market value of the shares) or for calculating the market value of the shares (if you are told the cost of equity.

There are two ways of calculating the growth rate (depending on the information given in the question) – either using the past dividend growth rate (which is the more common way) or by using Gordon’s growth approximation which is rate of retention x rate of return on reinvestment. (If we are not told the rate of return on reinvestment then we use the cost of equity instead).

The WACC has nothing to do with it. The WACC is calculated using the cost of equity and the market value of equity (and obviously debt). The dividend growth rate is only relevant in calculating either the cost of equity or the market value of equity.

All of this is covered in detail in my free lectures – I cannot type out all the lectures here!

We will find the asset beta for a quoted company in a similar business, and use that to determine a required return by shareholders and therefore the cost of equity.
This is dealt with in the chapters on CAPM.