1) The Down and Out Co. just issued a dividend of $2.51 per share on its common stock. The company is expected to maintain a constant 4 percent growth rate in its dividends indefinitely. If the stock sells for $50 a share, what is the company's cost of equity? (Do not round your intermediate calculations.)
rev: 09_20_2012
9.02%
9.22%
9.68%
5.3%
8.76%
2) The Up and Coming Corporation's common stock has a beta of 1.5. If the risk-free rate is 3.5 percent and the expected return on the market is 15 percent, what is the company's cost of equity capital? (Do not round your intermediate calculations.)
rev: 09_20_2012
20.75%
21.58%
21.79%
19.71%
26%