SBouchard and Company Hired You as a Consultant to Help

question 73

Multiple Choice

S.Bouchard and Company hired you as a consultant to help estimate its cost of capital.You have obtained the following data: D₀ = $0.85;P₀ = $22.00;and g = 6.00% (constant) .The CEO thinks,however,that the stock price is temporarily depressed,and that it will soon rise to $34.00.Based on the DCF approach,by how much would the cost of equity from retained earnings change if the stock price changes as the CEO expects? Do not round your intermediate calculations.

• A) -1.45%
• B) -1.72%
• C) -1.11%
• D) -1.40%
• E) -1.36%

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Definitions:

Stimulating Environment

An environment that provides sensory, intellectual, or emotional stimuli, which can foster learning and development.

Egocentrism

The inability to differentiate between one's own perspective and someone else's, often leading to viewing situations from only a personal viewpoint.

Maturation

The process of development in which an individual matures or reaches full biological potency, influenced by genetic factors rather than by learning or experience.

Walk

The act of moving at a regular pace by lifting and setting down each foot in turn, never having both feet off the ground at once.