1. A company is expected to pay a dividend of $1.90 next year. Dividends are expected to grow at a constant rate of 3% per year, and the stock price is currently $12.50. The company's marginal tax rate is 40%. Compute the cost of internal equity (retained earnings).
2. Estimating the Annuity Amount. Amy and Vince want to save $6000 so that they can take a trip to Europe in four years. How much must they save each month to have the money they need if they can get 11 %,compounded monthly, on their savings?