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:

Conditioned Response

A learned response to a previously neutral stimulus that has become associated with an unconditioned stimulus.

Primary Reinforcer

A stimulus that is naturally rewarding and satisfies a basic biological need, such as food or water.

Stimulus Generalization

The process by which a response that has been learned to one stimulus is elicited by a different, but similar, stimulus.

Conditioned Stimulus

A previously neutral stimulus that, after becoming associated with the unconditioned stimulus, eventually comes to trigger a conditioned response.