Given That the Cost of Common Stock Is 18 Percent

question 127

Multiple Choice

Given that the cost of common stock is 18 percent, dividends are $1.50 per share and the price of the stock is $12.50 per share, what is the annual growth rate of dividends?

• A) 4 percent
• B) 5 percent
• C) 6 percent
• D) 8 percent

---

Definitions:

Horizontal Equity

The principle that individuals in similar financial conditions should be treated equally by the taxation system.

Vertical Equity

A principle in taxation that states taxpayers with a greater ability to pay should contribute more in taxes.

Regressive Tax

A tax for which high-income taxpayers pay a smaller fraction of their income than do low-income taxpayers.

Federal Tax Receipts

The revenue collected by the federal government from various taxes like income tax, corporation tax, and other levies.