An All-Equity Firm Produced a Dividend Flow of $30,000 Last

question 7

Multiple Choice

An all-equity firm produced a dividend flow of $30,000 last year.The market value of the firm is $875,000 and the dividend is expected to increase at 3% each year.What is the cost of equity capital for this firm?

• A)6.53%
• B)6.91%
• C)7.45%
• D)7.89%

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Definitions:

Opponent-process Theory

The opponent-process theory is a psychological and neurological model that accounts for a wide range of behaviors, including color vision and emotional reactions, by proposing that opposite emotional states are controlled by competing processes.

Dangerous Activities

Behaviors or actions that carry a high risk of causing physical harm or injury to the individual involved or to others.

Initial Arousal

The initial phase of physiological and psychological excitement or alertness triggered by stimulus or thought.

Professional Revenue Model

A business model that is designed to generate income by providing professional services.