ADK Industries Common Shares Sell for $60 Per Share

question 120

Multiple Choice

ADK Industries common shares sell for $60 per share. ADK expects to set their next annual dividend at $3.75 per share. If ADK expects future dividends to grow at 9% per year, indefinitely, the current risk-free rate is 4%, the expected rate on the market is 11%, and the stock has a beta of 1.5, what should be the best estimate of the firm's cost of equity?

• A) 15.25%
• B) 14.50%
• C) 14.88%
• D) 15.03%

---

Definitions:

Behavior

The actions, conduct, or functions of a person or animal in response to external and internal stimuli.

Needs Hierarchy Model

A psychological theory proposed by Abraham Maslow that suggests human needs are arranged in a hierarchy from most to least pressing: physiological needs, safety, love/belonging, esteem, and self-actualization.

Manager

A person in charge of managing an organization or a team of employees.

United States

A country located in North America, comprising 50 states and known for its significant cultural and economic influence globally.