Given the Information Below, Calculate the Expected Growth Rate (G) $P _ { 0 } = \frac { \tilde { D } _ { 1 } } { r _ { s } - g }$

question 64

Multiple Choice

Given the information below, calculate the expected growth rate (g) of dividends, using the constant growth model ,
$P _ { 0 } = \frac { \tilde { D } _ { 1 } } { r _ { s } - g }$ Beta = 1.75; rRF = 7 percent; rM = 11 percent; dividend payout ratio = 30 percent; rd = 10 percent (paid) on all long- term debt; P/E ratio = 10; sales = 5,000 units; sales price per unit = $5; variable cost per unit = $2; fixed cost =
$1,000; common stock shares outstanding = 5,000; long-term debt outstanding = $10,000; tax rate = 40 percent.Assume equilibrium exists in the market.

• A)11.34%
• B)6.54%
• C)11.0%
• D)10.68%
• E)10.19%

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Definitions:

Equivalent Units

A concept in cost accounting used to express the amount of work done by incomplete units of production in terms of fully completed units.

Physical Units

A quantifiable measurement of products or goods that doesn't consider value or weight, used in inventory and production.

Process Cost Accounting

An accounting method used to assign production costs to products based on processes or departments, useful in mass production environments.

Materials Account

An account used in bookkeeping to track costs of raw materials during an accounting period.