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NEW QUESTION: 1
J. Ross and Sons Inc. has a target capital structure that calls for 40 percent debt, 10 percent preferred stock, and 50 percent common equity. The firm's current after-tax cost of debt is 6 percent, and it can sell as much debt as it wishes at this rate. The firm's preferred stock currently sells for $90 a share and pays a dividend of $10 per share; however, the firm will net only $80 per share from the sale of new preferred stock. Ross expects to retain $15,000 in earnings over the next year. Ross' common stock currently sells for $40 per share, but the firm will net only $34 per share from the sale of new common stock. The firm recently paid a dividend of $2 per share on its common stock, and investors expect the dividend to grow indefinitely at a constant rate of 10 percent per year. What is the firm's cost of newly issued common stock?
A. 16.5%
B. 10.0%
C. 15.5%
D. 12.5%
E. 18.0%
Answer: A
Explanation:
Explanation/Reference:
Explanation:
Cost of new common equity:
k(e) = ($2.20/$34) + 0.10 = 0.1647 = 16.5%.

NEW QUESTION: 2
Which is an operation of the Extensible Transport Framework Factories interface?
A. create_connection()
B. create_properties()
C. create_handle()
D. create_profile()
Answer: A

NEW QUESTION: 3
In an efficient market, if an asset's intrinsic value is estimated to be $15 while the market price is $12, the asset appears to be:
A. uncertain.
B. overvalued.
C. undervalued.
Answer: C
Explanation:
In such a market the market price should be very similar to the intrinsic value.

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