Using the Gordon Model, Estimate the Cost of Retained Earnings

question 120

Multiple Choice

Using the Gordon Model, estimate the cost of retained earnings for a firm whose stock is currently selling for $40, paid a dividend of $.75 last year, and whose growth is expected to be 6% indefinitely.

• A)7.25%
• B)7.99%
• C)10.62%
• D)4/80%

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Definitions:

Consumer Price Index

A gauge that tracks the average variation over periods in the costs urban buyers incur for a defined set of consumer products and services.

Consumer Price Index

A gauge that tracks the average variation over time in the prices urban consumers pay for a collection of consumer goods and services.

Producer Price Index

An economic indicator representing the average change over time in the selling prices received by domestic producers for their output.

Consumer Price Index

A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care, used to track changes in living costs.