Use the Dividend Growth Model to Determine the Required Rate

question 76

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 $20.00 per share and that you should anticipate paying a dividend of $0.50 in one year.If you anticipate a constant growth in dividends of 4.00% per year and the investment banking firm will take 10.00% per share as flotation costs,what is the required rate of return for this issue of new common stock?

• A)6.78%
• B)7.08%
• C)7.19%
• D)10.20%

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Operational Proficiencies

The ability of an organization to carry out core business processes efficiently and effectively.

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The act of providing the means or opportunity for someone to achieve something or the act of making a device, system, or feature operational.

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