Use the Dividend Growth Model to Determine the Required Rate

question 30

Multiple Choice

Use the dividend growth model to determine the required rate of return for equity.Your firm intends to issue new common stock.Your investment bankers have determined that the stock should be offered at a price of $45.00 per share and that you should anticipate paying a dividend of $1.50 in one year.If you anticipate a constant growth in dividends of 3.00% per year and the investment banking firm will take 5.00% per share as flotation costs,what is the required rate of return for this issue of new common stock?

• A)6.51%
• B)6.83%
• C)7.08%
• D)There is not enough information to answer this question.

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Stable Ways

Enduring patterns or methods of behavior, thought, or emotion that are consistent over time and situations.

Gender Socialization

The process through which individuals learn and acquire behaviors and attitudes deemed appropriate for their gender based on cultural norms.

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Qualities or characteristics that are traditionally associated with being young or typically feminine in nature.

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