A Firm Has Just Paid Its Annual Dividend of $5

question 20

Multiple Choice

A firm has just paid its annual dividend of $5.64 a share.Thereafter the dividend is expected to increase at a rate of 2% a year.If the firm's stock currently sells for $60 a share,what is the cost of equity?

• A) 11.59%
• B) 14.33%
• C) 11.40%
• D) 9.40%

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Definitions:

Hourly Rate

A measure of compensation or payment calculated based on the number of hours worked.

Wage

The fixed regular payment made by an employer to an employee, typically expressed on an hourly, daily, or piecework basis.

Bonus

An additional payment or reward given to employees or organizations, often as an incentive or reward for performance.

Management By Objectives (MBO)

Systematic approach that allows managers to focus on attainable goals and to achieve the best results based on the organization’s resources.