XYZ Company Issues Common Stock at a Price of $25

question 29

Multiple Choice

XYZ Company issues common stock at a price of $25 a share.The firm expects to pay a dividend of $2.20 a share next year.If the dividend is expected to grow at 2.5% annually,what is XYZ's cost of common equity?

• A) 6.3%
• B) 11.3%
• C) 13.7%
• D) 8.9%

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Definitions:

Strict Liability

A legal principle where the defendant is liable for damages caused by their actions, regardless of fault or intent.

Privity Of Contract

The principle that contracts confer rights and impose obligations only on the parties actually agreeing to the terms.

Squirt Gun

A water-emitting toy designed for recreational purposes, often used in games and play.

Duty To Warn

The legal obligation to inform others of a known danger or risk, typically related to product safety or professional services.