1. Crystal Inc. just paid its first annual dividend of $0.60 a share. The firm plans to increase the dividend by 4 percent per year indefinitely. What is the firm's cost of equity if the current stock price is $10 a share?
7.94 percent
9.11 percent
10.24 percent
8.16 percent
2. A firm value could be computed based on the future cash flows from assets, free cash flows (FCF), that it will generate. The present values of these cash flows should be computed using __________ as the discount rate.
weighted average cost of capital
cost of equity
aftertax cost of debt
cost of preferred stock