As the Winner of a Contest, You Are Now CFO

question 77

Multiple Choice

As the winner of a contest, you are now CFO for the day for Maguire Inc.and your day's job involves raising capital for expansion.Maguire's common stock currently sells for $45.00 per share, the company expects to earn $2.75 per share during the current year, its expected payout ratio is 70%, and its expected constant growth rate is 6.00%.New stock can be sold to the public at the current price, but a flotation cost of 8% would be incurred.By how much would the cost of new stock exceed the cost of common from reinvested earnings?

• A) 0.09%
• B) 0.19%
• C) 0.37%
• D) 0.56%
• E) 0.84%

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Definitions:

Elastic Stockings

Specially designed hosiery that applies graduated pressure to the legs to improve blood circulation and prevent venous disorders.

Dorsiflex Foot

The action of raising the foot upwards towards the shin, a movement important in walking and balancing.

Body Alignment

The optimal placement of body parts so that the bones and muscles work efficiently, reducing strain and enhancing physical health.

Musculoskeletal System

The organ system that enables humans to move using the muscular and skeletal systems, including bones, muscles, tendons, ligaments, and cartilage.