Given the Information Below, Calculate the Expected Growth Rate (G)

question 37

Multiple Choice

Given the information below, calculate the expected growth rate (g) of dividends, using the constant growth model Beta = 1.75; r_RF = 7 percent; r_M = 11 percent; dividend payout ratio = 30 percent; r_d = 10 percent (paid) on all long-term debt; P/E ratio = 10; sales = 5,000 units; sales price per unit = $5; variable cost per unit = $2; fixed cost = $1,000; common stock shares outstanding = 5,000; long-term debt outstanding = $10,000; tax rate = 40 percent.Assume equilibrium exists in the market.

• A) 11.34%
• B) 6.54%
• C) 11.0%
• D) 10.68%
• E) 10.19%

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Definitions:

Social Loafing

The phenomenon whereby individuals exert less effort to achieve a goal when they work in a group than when they work alone.

Ringelmann Effect

The phenomenon by which individual productivity decreases as the size of a group increases, due to coordination and motivational losses.

Group Process

Refers to the mechanisms through which group members interact and collaborate to achieve shared objectives, emphasizing communication and decision-making patterns.

Socially Complicated

Refers to situations or relationships characterized by complexity and difficulties in social interactions and dynamics.