As the Assistant to the CFO of Johnstone Inc

question 31

Multiple Choice

As the assistant to the CFO of Johnstone Inc., you must estimate its cost of common equity. You have been provided with the following data: D0 = $0.80; P0 = $22.50; and gL = 8.00% (constant) . Based on the dividend growth model, what is the cost of common from reinvested earnings?

• A) 10.69%
• B) 11.25%
• C) 11.84%
• D) 12.43%
• E) 13.05%

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Definitions:

Probability Assignment

An academic or educational task involving the calculation or analysis of probabilities concerning certain events or scenarios.

Legitimate

Something that is lawful, justified, and recognized as valid or conforming to established rules and standards.

Joint Frequency Distribution

A statistical representation showing the frequency of combined occurrences of two or more variables.

Contingency Table

A tool used in statistics to analyze and display the frequency distribution of variables, showing the number of observations for each combination of categories.