J Ross and Sons Inc

question 33

Multiple Choice

J. Ross and Sons Inc. has a target capital structure that calls for 40 percent debt, 10 percent preferred stock, and 50 percent common equity. Ross' common stock currently sells for $40 per share. The firm recently paid a dividend of $2 per share on its common stock, and investors expect the dividend to grow indefinitely at a constant rate of 10 percent per year. Which of the following is the firm's cost of retained earnings? (Round off the answer to two decimal places.)

• A) 16.34 percent
• B) 10.42 percent
• C) 15.50 percent
• D) 12.20 percent
• E) 13.25 percent

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Definitions:

Knowledge

Information, understanding, or skill that one gets through experience or education; the theoretical or practical understanding of a subject.

Service Work

Work that involves providing a service to businesses or individual clients, customers, or consumers rather than manufacturing goods.

Sweatshops

Work environments that are characterized by poor working conditions, low wages, and long hours, often associated with the exploitation of labor in developing countries.

Exploitation

The act of treating someone unfairly in order to benefit from their work or resources.