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As the Assistant to the CFO of Johnstone Inc

Question 7

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: D0 = $0.80; P0 = $22.50; and gL = 8.00% (constant) .Based on the dividend growth model, 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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