The Following Financial Information Is Available on Rawls Manufacturing Company

question 22

Multiple Choice

The following financial information is available on Rawls Manufacturing Company: $$\begin{array} { l r } \text { Current per share market price } & \$ 48.00 \\\text { Current per share dividend } & \$ 3.50 \\\text { Current per share earnings } & \$ 6.00 \\\text { Beta } & 12.0 \% \\\text { Expected rate of return on market } & 6.0 \% \\\text { Risk-free rate } & 5.0 \%\end{array}$$ ? Rawls can issue new common stock to net the company $44 per share. Determine the cost of external equity capital using the dividend capitalization model approach. (Compute answer to the nearest 0.1%.)

• A) 12.7%
• B) 14.4%
• C) 12.6%
• D) 13.4%

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Definitions:

Intentional

Intentional refers to doing something with purpose or on purpose, indicating actions that are deliberate and planned.

Restructuring Strategy

A corporate management term referring to the act of reorganizing the legal, ownership, operational, or other structures of a company to make it more profitable or better organized for its present needs.

Merger

The combination of two or more companies into a single entity, often to leverage synergies, expand markets, or enhance efficiencies.

Liquidation

The process of bringing a business to an end and distributing its assets to claimants, often occasioned by bankruptcy or dissolution.