Sentry Manufacturing paid a dividend yesterday of $5 per share (D0 = $5 ). The dividend is
expected to grow at a constant rate of 8% per year. The price of Sentry Manufacturing's stock today
is $29 per share.
If Sentry Manufacturing decides to issue new common stock, flotation costs will
equal $2.50 per share. Sentry Manufacturing's marginal tax rate is 35%. Based on the above
information, the cost of retained earnings is
A) 28.38%. B) 31.40%. C) 24.12%. D) 26.62%.
D
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The period order quantity:
A) can only be applied to continuous demand. B) orders a constant amount for a set number of periods. C) orders the same quantity each period. D) is based on the same assumptions as the EOQ model. E) works like a quantity discount.
Which of the following statements regarding a share repurchase is NOT true?
A) Share repurchases occur most commonly as open market repurchases. B) The firm typically buys its shares just like any investor would purchase stocks listed on a stock exchange. C) A firm often announces its intention to repurchase a certain number of its shares, say over the upcoming year. D) In most cases, a firm may agree to repurchase shares from a major shareholder at a negotiated price.