Your chief operating officer argues the following: a. Our stock price is currently $60, and our dividend

Question:

Your chief operating officer argues the following:

a. “Our stock price is currently $60, and our dividend per share is $6. It means that it costs us 10 percent to use shareholders’ cash ($6 divided by $60).”

b. “From our balance sheet our liabilities are $80 million. From our income statement our interest expenses are $5 million. Thus our cost of debt is 6.25 percent ($5 million divided by $80 million).”

Which statement is true or false?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Cost Of Debt
The cost of debt is the effective interest rate a company pays on its debts. It’s the cost of debt, such as bonds and loans, among others. The cost of debt often refers to before-tax cost of debt, which is the company's cost of debt before taking... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...