1. A company currently pays an annual dividend of $1.25(D0). If the growth rate of dividends is 7.5%, what is the value of the dividend one year from now?
$0.90
$1.34
$1.57
$2.36
$1.11
2. Calculate the firm's after tax cost of debt if the current coupon rate on existing debt is 7% and the firm has a tax rate of 40%.
2.8%
4.2%
4.0%
12.6%