Use the Following Information to Answer the Question(s) Below

question 14

Multiple Choice

Use the following information to answer the question(s) below.
Rearden Metals has a current stock price of $30 share, is expected to pay a dividend of $1.20 in one year, and its expected price right after paying that dividend is $33.
-Rearden's equity cost of capital is closest to:

• A) 4.0%
• B) 6.4%
• C) 8.2%
• D) 10.0%
• E) 14.0%

---

Definitions:

Cash Flows

The cumulative amount of capital moving into and leaving a company, impacting its liquidity.

Internal Rate of Return (IRR)

The discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero, used to assess the profitability of potential investments.

Mutually Exclusive Projects

Investment opportunities where the acceptance of one project prevents the acceptance of another, requiring a choice to be made based on potential returns.

Initial Cost

Initial cost is the total expense incurred to acquire an asset or start a project, including purchase price and all related fees.