1. A firm is expected to pay an annual dividend of $1.10 per share next year. The market price of the stock is $21.80 and the growth rate is 4.50%. What is the firm's cost of equity?
a. 9.24%
b. 10.54%
c. 9.77%
d. 9.55%
e. 7.91%
2. Consider an equipment asset that costs $142,000 and is depreciated straight-line to zero over its seven-year tax life. The asset is to be used in a four-year project. At the end of the project the asset can be sold for $65,000. The tax rate is 30%. What is the aftertax salvage value?
a. $66,242.86
b. $45,500.00
c. $63,757.14
d. $53,805.15
e. $48,100.00