[amp_mcq option1=”40.00%” option2=”22.29%” option3=”14.28%” option4=”80.00%” correct=”option2″]<\/p>\n
The correct answer is B. 22.29%.<\/p>\n
The cost of common stock is the rate of return that a company must earn on its equity in order to satisfy its investors. It is calculated by taking the expected dividend per share and dividing it by the current stock price, then adding the expected growth rate. In this case, the expected dividend per share is Rs 5, the current stock price is Rs 35, and the expected growth rate is 8%. Therefore, the cost of common stock is:<\/p>\n
= (5 \/ 35) + 8%
\n= 22.29%<\/p>\n
Option A is incorrect because it is the dividend yield, which is the annual dividend per share divided by the current stock price. Option C is incorrect because it is the capital gains yield, which is the expected change in the stock price divided by the current stock price. Option D is incorrect because it is the required rate of return, which is the minimum rate of return that an investor expects to earn on an investment.<\/p>\n","protected":false},"excerpt":{"rendered":"
[amp_mcq option1=”40.00%” option2=”22.29%” option3=”14.28%” option4=”80.00%” correct=”option2″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[945],"tags":[],"class_list":["post-55491","post","type-post","status-publish","format-standard","hentry","category-financial-management","no-featured-image-padding"],"yoast_head":"\n