As the Winner of a Contest, You Are Now CFO

question 77

Multiple Choice

As the winner of a contest, you are now CFO for the day for Maguire Inc.and your day's job involves raising capital for expansion.Maguire's common stock currently sells for $45.00 per share, the company expects to earn $2.75 per share during the current year, its expected payout ratio is 70%, and its expected constant growth rate is 6.00%.New stock can be sold to the public at the current price, but a flotation cost of 8% would be incurred.By how much would the cost of new stock exceed the cost of common from reinvested earnings?

• A) 0.09%
• B) 0.19%
• C) 0.37%
• D) 0.56%
• E) 0.84%

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Definitions:

Pathology Present

Indicates that disease or abnormality was found through the study of cells, tissues, and organs.

Trigger Points

Hyperirritable spots in skeletal muscle associated with palpable nodules in tight bands of muscle fibers, commonly causing pain.

Headache

A painful sensation in any part of the head, ranging from sharp to dull, that may occur with other symptoms.

Pathology Present

Indicates the presence of disease or pathological changes in an organism.