To Help Estimate Its Cost of Common Equity, Maxwell and Associates

question 76

Multiple Choice

To help estimate its cost of common equity, Maxwell and Associates recently hired you.You have obtained the following data: D₀ = $0.90; P₀ = $27.50; and g_L = 7.00% (constant) .Based on the dividend growth model, what is the cost of common from reinvested earnings?

• A) 9.29%
• B) 9.68%
• C) 10.08%
• D) 10.50%
• E) 10.92%

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