The Following Financial Information Is Available on Rawls Manufacturing Company

question 73

Multiple Choice

The following financial information is available on Rawls Manufacturing Company: $\begin{array}{ll}\text {Current per share market price }& \$48.00\\\text { Current \( (t=0) \) per share dividend}&\$3.50 \\\text {Expected long-term growth rate }&5.0\% \\\end{array}$
? Rawls can issue new common stock to net the company $44 per share. Determine the cost of internal equity capital using the dividend capitalization model approach. (Compute answer to the nearest 0.1%.)

• A) 12.3%
• B) 13.4%
• C) 13.0%
• D) 12.7%

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Definitions:

Barriers To Entry

Are obstacles that make it difficult for new competitors to enter a market, including high startup costs, strict regulations, and established brand loyalty among consumers.

Excess Capacity

Plant resources that are underused when imperfectly competitive firms produce less output than that associated with achieving minimum average total cost.

Product Differentiation

A marketing strategy that businesses use to distinguish their products or services from those of competitors.

Competitive Element

A factor that distinguishes a company in the marketplace, often related to quality, price, or innovation, aiding in achieving a competitive advantage.