The Third Cup Company Has Just Paid a Dividend of $3

question 68

Multiple Choice

The Third Cup Company has just paid a dividend of $3 per share.The dividends are expected to grow at a rate of 4% per year for the foreseeable future.The current stock price is $25 per share.The firm faces a tax rate of 40% and flotation costs of 5% on new stock issues.The cost of equity for internal funds is:

• A)9.89%
• B)10.12%
• C)16.48%
• D)16.87%

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Definitions:

Sales Presentation

A sales presentation is a pitch or demonstration aimed at persuading an audience to purchase a product or service.

Financing Challenges

Difficulties or obstacles encountered in obtaining funds or capital to launch or expand a business.

Delivery Schedule

A detailed plan specifying the timing and sequence for the distribution or arrival of goods and services.

Stimulus-response Model

A concept in psychology and marketing that describes how individuals respond to stimuli (external inputs) with predetermined reactions, useful in understanding consumer behavior.