1. Teall Development Company hired you as a consultant to help them estimate its cost of capital. You have been provided with the following data: D1 = $1.45; P0 = $38.00; and g = 6.50% (constant). Based on the DCF approach, what is the cost of equity from retained earnings?
12.07%
12.28%
9.70%
10.52%
10.32%
2. Which of the following should require the highest rate of return?
Accounts receivable usually collected in 30 days
90 day Certificate of deposit
120 day Treasury bill
Money market that can be liquidated at anytime