A Firm Has Common Stock with a Market Price of $100

question 93

Multiple Choice

A firm has common stock with a market price of $100 per share and an expected dividend of $5.61 per share at the end of the coming year. A new issue of stock is expected to be sold for $98, with $2 per share representing the underpricing necessary in the competitive capital market. Flotation costs are expected to total $1 per share. The dividends paid on the outstanding stock over the past five years are as follows: The cost of this new issue of common stock is

• A) 5.8 percent.
• B) 7.7 percent.
• C) 10.8 percent.
• D) 12.8 percent.

---

Definitions:

Corporate Social Responsibility

The concept that businesses should be accountable for their impact on society and the environment, going beyond profit-making to ethical, social, and ecological concerns.

Mary Parker Follett

An early 20th-century social worker and management consultant who emphasized the importance of human relations and collaborative management in organizations.

Maslow

A theory of human motivation that suggests people are motivated by a hierarchy of needs, starting from basic physiological needs to self-actualization.

Self-Actualized

Pertaining to the state of having achieved one's full potential, often associated with realizing personal talents and capabilities.