Given the information below,calculate the expected growth rate (g) of dividends,using the constant growth model Beta = 1.75;rRF = 7 percent;rM = 11 percent;dividend payout ratio = 30 percent;rd = 10 percent (paid) on all long-term debt;P/E ratio = 10;sales = 5,000 units;sales price per unit = $5;variable cost per unit = $2;fixed cost = $1,000;common stock shares outstanding = 5,000;long-term debt outstanding = $10,000;tax rate = 40 percent.Assume equilibrium exists in the market.
A) 11.34%
B) 6.54%
C) 11.0%
D) 10.68%
E) 10.19%
Correct Answer:
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