Using the Constant Growth Model, a Firm's Expected Dividend Yield

question 92

Multiple Choice

Using the constant growth model, a firm's expected dividend yield (D₁) is 4% of the stock price, and its growth rate is 5%. If the tax rate is 21%, what is the firm's cost of equity?

• A) 10%
• B) 6.65%
• C) 9.0%
• D) 5.85%

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Definitions:

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Beliefs or practices resulting from ignorance, fear of the unknown, trust in magic or chance, or a misunderstanding of causation.

Obsessive-Compulsive Behaviors

Repetitive actions or mental acts that a person feels compelled to perform, often driven by irrational fears or thoughts.

Avoidance Learning

A type of learning in which an organism learns to prevent or avoid an unpleasant experience.

Conditioned Response

A learned reaction to a specific stimulus as a result of conditioning, where the response becomes automatic or reflexive.