1. A firm has just paid its annual dividend of $5.64 a share. Thereafter the dividend is expected to increase at a rate of 2% a year. If the firm's stock currently sells for $60 a share, what is the cost of equity?
A. 11.59%
B. 14.33%
C. 11.40%
D. 9.40%
2. Preston Milled Products currently sells a product with a variable cost per unit of $26 and a unit selling price of $47. At the present time, the firm only sells on a cash basis with monthly sales of 330 units. The monthly interest rate is 1.2 percent. What is the switch break-even point if the firm switched to a net 30 credit policy? Assume the selling price per unit and the variable costs per unit remain constant.
342 units
339 units
343 units
344 units
346 units