Using the Constant Growth Model, a Firm's Expected Dividend Yield

question 60

Multiple Choice

Using the constant growth model, a firm's expected dividend yield (D₁) is 4% of the stock price, and its growth rate is 5%. If the tax rate is 35%, what is the firm's cost of equity?

• A) 10%
• B) 6.65%
• C) 9.0%
• D) 5.85%

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Definitions:

Learned Helplessness

A condition where a person suffers from a sense of powerlessness, arising from traumatic events or persistent failure to succeed.

Depression

An emotional wellness issue where an individual experiences constant feelings of sadness or has a diminished interest in activities, significantly affecting their daily living.

Seligman

A psychologist known for his work in positive psychology and the theory of learned helplessness.

Julian Rotter

A psychologist from the United States who is recognized for creating the theory of social learning and the idea behind locus of control.