Multiple Choice
The CEO of Harding Media Inc. as asked you to help estimate its cost of common equity. You have obtained the following data: D0 = $0.85; P0 = $22.00; and gL = 6.00% (constant) . The CEO thinks, however, that the stock price is temporarily depressed, and that it will soon rise to $40.00. Based on the dividend growth model, by how much would the cost of common from reinvested earnings change if the stock price changes as the CEO expects?
A) $1.49%
B) $1.66%
C) $1.84%
D) $2.03%
E) $2.23%
Correct Answer:
Verified
Correct Answer:
Verified
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