Biotec Has Estimated the Costs of Debt and Equity Capital

question 19

Multiple Choice

Biotec has estimated the costs of debt and equity capital for various proportions of debt in its capital structure: $\begin{array}{lll}\% \text { of Debt } & \text { Cost of Debt }(\%) &\text { Cost of Equity }(\%) \\35 & 5.4 & 13.8 \\40 & 5.6 & 14.0 \\45 & 5.9 & 14.3 \\50 & 6.4 & 14.7\end{array}$
If Biotec pays a current dividend of $1.00 and expects dividends to grow at a constant rate of 7%, what is Biotec's stock price if it obtains its optimal capital structure?

• A) $14.66
• B) $30.40
• C) $30.14
• D) $29.40

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Definitions:

Inventory Turnover

A measure of how quickly inventory is sold, calculated by dividing the cost of goods sold by the average inventory.

Cash Ratio

A metric assessing the capacity of a business to settle short-term debts with its available cash and near-cash assets.

Inventory Turnover

A metric demonstrating the rate at which a company's inventory turnover occurs, signaling the proficiency of its inventory handling over a defined period.

Inventory Turnover

A measure of how quickly a company sells and replaces its stock of goods within a given time period.