1. Audio, Inc. common stock is priced currently at $17.50 a share. The company just paid $1.30 per share as its annual dividend. The dividends have been increasing by 3.5 percent annually and are expected to continue doing the same. What is this firm's cost of equity?
A 6.03 percent
B 6.18 percent
C 8.47 percent
D 9.41 percent
E 11.19 percent
2. Game Studio, LLC is expected to pay an annual dividend of $0.70 a share next year. The market price of the stock is $17.20 and the growth rate is 6 percent. What is the firm's cost of equity?
A.7.58 percent
B 7.91 percent
C 8.24 percent
D 9.08 percent
E 10.07 percent