Question
Suppose Fastest Company, a new start-up firm, initially has $ 47.7 million in common equity and its common shareholders require or expect a return of
Suppose Fastest Company, a new start-up firm, initially has $ 47.7 million in common equity and its common shareholders require or expect a return of 15 percent on this investment. After the first year, Fastest Company makes an after-tax profit of $ 5.9 million (assume for now that Fastest Company does not have any preferred shares). How satisfied would the common shareholders be with the profit?
(Select the best choice below.) A. Given the shortfall between actual ($ 5.9 million) and expected ($ 7.2 million) profits, investors will be dissatisfied.
B. Given the shortfall between actual ($ 7.2 million) and expected ($ 5.9 million) profits, investors will be satisfied.
C. Given the shortfall between actual ($ 7.2 million) and expected ($ 5.9 million) profits, investors will be dissatisfied.
D. Given the shortfall between actual ($ 5.9 million) and expected ($ 7.2 million) profits, investors will be satisfied.
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