Stock in Globex Corporation Has a Beta of 0

question 144

Multiple Choice

Stock in Globex Corporation has a beta of 0.9. The expected market return is 10%, and T-bills are currently yielding 3.5%. The company's next dividend is expected to be $2 per share, and dividends
Have been growing at a 4% annual rate. If the stock sells for $25 per share, what is your best
Estimate of the company's cost of equity?

• A) 11.59%
• B) 10.68%
• C) 9.77%
• D) 8.86%
• E) 7.95%

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Definitions:

Labor Rate Variance

The difference between the actual hourly wage paid to workers and the standard or expected hourly wage.

Cash Account

An account that records all transactions involving cash, including receipts and payments.

Ending Balance

The amount of money remaining in a financial account at the end of a reporting period, after all transactions have been accounted for.

Cash Account

An account that records cash transactions, including cash receipts and disbursements.