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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Self-Sabotage

Engaging in behaviors or thought patterns that hinder one's own success or well-being.

Lack of Motivation

A state or condition where there is a reduced desire or willingness to act or accomplish tasks.

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Procrastination

The action of delaying or postponing tasks, often unnecessarily and to the detriment of oneself.