As the Assistant to the CFO of Johnstone Inc

question 43

Multiple Choice

As the assistant to the CFO of Johnstone Inc., you must estimate its cost of common equity.You have been provided with the following data: D? = $0.80; P? = $22.50; and g = 8.00% (constant) .Based on the DCF approach, what is the cost of common from reinvested earnings?

• A) 10.69%
• B) 11.25%
• C) 11.84%
• D) 12.43%
• E) 13.05%

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Definitions:

Invisible Hand

a metaphor introduced by Adam Smith to describe the self-regulating behavior of the marketplace, where individual self-interests promote the good of the community.

Economist

A professional who studies how societies use resources to produce goods and services and distribute them among various groups.

Wealth Of Nations

Refers to "The Wealth of Nations," an influential book by Adam Smith that outlines the basics of free market economics.

Government Intervention

Government intervention refers to regulatory actions taken by a government to affect or influence the economy, market operations, or social welfare.