The Cracker Barrel Has a Beta of 0

question 78

Multiple Choice

The Cracker Barrel has a beta of 0.98,a dividend growth rate of 3.2 percent,a stock price of $33 a share,and an expected annual dividend of $1.06 per share next year.The market rate of return is 11.2 percent and the risk-free rate is 3.7 percent.What is the firm's cost of equity?

• A)7.74 percent
• B)8.73 percent
• C)9.30 percent
• D)9.72 percent
• E)17.46 percent

---

Definitions:

Straight-Line Depreciation

This method of depreciation spreads the cost evenly across the useful life of a fixed asset, resulting in consistent annual charges.

Variable Cost

Financial charges that are tied to the extent of production levels.

IRR

Internal Rate of Return; a financial metric used to estimate the profitability of potential investments.

Upper Bound

The highest value that a mathematical function, statistical operation, or range of variables can reach under specific conditions.