1. ABC Company has a share price of $25 today. If ABC Company is expected to pay a dividend of $1.00 this year, and its stock price is expected to grow to $28.75 at the end of the year, what is ABC's dividend yield and equity cost of capital?
2. XYZ Company currently pays a dividend of $1.50 per year, and it will continue to pay this dividend forever.
a) Calculate the price per share if its equity cost of capital is 10% per year assuming that dividends are paid at the end of the year.
b) Calculate the price per share if its equity cost of capital is 10% per year assuming that dividends are paid quarterly.