Your Company's Stock Sells for $50 Per Share,its Last Dividend

question 4

Multiple Choice

Your company's stock sells for $50 per share,its last dividend (D₀) was $2.00,its growth rate is a constant 5 percent,and the company would incur a flotation cost of 15 percent if it sold new common stock.Net income for the coming year is expected to be $500,000,the firm's payout ratio is 60 percent,and its common equity ratio is 30 percent.If the firm has a capital budget of $1,000,000,what component cost of common equity will be built into the WACC for the last dollar of capital the company raises?

• A) 9.20%
• B) 9.94%
• C) 10.50%
• D) 11.75%
• E) 12.30%

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Definitions:

Employees

Individuals who are hired by an organization to perform specific duties and responsibilities in exchange for compensation.

Fragmented Cultures

Cultures within an organization that are varied and diverse, often lacking a unified set of norms or beliefs.

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The process of earning financial returns or profits, typically through business, investments, or employment.

Top Priority

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