Biotec Has Estimated the Costs of Debt and Equity Capital

question 55

Multiple Choice

Biotec has estimated the costs of debt and equity capital for various proportions of debt in its capital structure:

If Biotec pays a current dividend of $1.00 and expects dividends to grow at a constant rate of 7%, what is Biotec's stock price if it obtains its optimal capital structure?

• A)$14.66
• B)$30.40
• C)$30.14
• D)$29.40

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Definitions:

Information Processing

A cognitive approach that likens the mind to a computer, focusing on how information is encoded, stored, and retrieved.

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Gestalt Principle

A theory in psychology that proposes the human brain organizes visual elements into groups or unified wholes when certain principles are applied.