16) A firm has common stock with a market price of $55 per share and an expected dividend of $2.81 per share at the end of the coming year. The dividends paid on the outstanding stock over the past five years are as follows: Year 1 2 234 3 4 5 Dividend $2.00 2.14 2.29 2.45 2.62 The cost of the firm's common stock equity is A) 4.1 percent. B) 5.1 percent. C) 12.1 percent. D) 15.4 percent.
16) A firm has common stock with a market price of $55 per share and an expected dividend of $2.81 per share at the end of the coming year. The dividends paid on the outstanding stock over the past five years are as follows: Year 1 2 234 3 4 5 Dividend $2.00 2.14 2.29 2.45 2.62 The cost of the firm's common stock equity is A) 4.1 percent. B) 5.1 percent. C) 12.1 percent. D) 15.4 percent.
Chapter7: Common Stock: Characteristics, Valuation, And Issuance
Section: Chapter Questions
Problem 2P
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Please answer them in a detail and comprehensive manner with formulas provided. I need a step by step answer, no excel sheet answer's format. THANKS
Transcribed Image Text:16) A firm has common stock with a market price of $55 per share and an expected dividend of
$2.81 per share at the end of the coming year. The dividends paid on the outstanding stock over
the past five years are as follows:
Year
1
2
4
л+
5
Dividend
$2.00
2.14
2.29
2.45
2.62
The cost of the firm's common stock equity is
A) 4.1 percent.
B) 5.1 percent.
C) 12.1 percent.
D) 15.4 percent.
16.1) A firm has a beta of 1.2. The market return equals 14 percent and the risk-free rate of
return equals 6 percent. The estimated cost of common stock equity is
A) 6 percent. B) 7.2 percent. C) 14 percent. D) 15.6 percent.
16.2) A firm has common stock with a market price of $25 per share and an expected
dividend of $2 per share at the end of the coming year. The growth rate in dividends has been
5 percent. The cost of the firm's common stock equity is
A) 5 percent. B) 8 percent. C) 10 percent. D) 13 percent.
(Ctrl
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