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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