As a consultant to Basso Inc., you have been provided with the following data: D1 = $0.67; P0 = $27.50; and gL = 8.00% (constant). What is the cost of common from reinvested earnings based on the dividend growth approach?
A) 9.42%
B) 9.91%
C) 10.44%
D) 10.96%
E) 11.51%

Question

As a consultant to Basso Inc., you have been provided with the following data: D1 = $0.67; P0 = $27.50; and gL = 8.00% (constant). What is the cost of common from reinvested earnings based on the dividend growth approach?
A) 9.42%
B) 9.91%
C) 10.44%
D) 10.96%
E) 11.51%

Quizplus · Accepted Answer

$\begin{array}{lr}
\mathrm{D}_{1} & \$ 0.67 \
\mathrm{P}_{0} & \$ 27.50 \
\mathrm{~g} & 8.00 \% \
\mathrm{I}_{\mathrm{s}}=\mathrm{D}_{1} / \mathrm{P}_{0}+\mathrm{g} & 10.44 \%
\end{array}$

As a Consultant to Basso Inc