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Question
To help them estimate the company's cost of capital, Smithco has hired you as a consultant. You have been provided with the following data: D1 = $1.45; P0 = $22.50; and gL = 6.50% (constant). Based on the dividend growth approach, what is the cost of common from reinvested earnings?a. 11.10%
b. 11.68%
c. 12.30%
d. 12.94%
e. 13.59%
Answer
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Which of the following is not correct for a firm with seasonal sales and customers who all pay promptly at the end of 30 days?
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b. False