1. A common stock priced at $78.56 has paid an annual dividend of $2.50 which is expected to grow at 3% annually. What is its component cost of capital if it faces a flotation cost of 2%?
2. A project with an initial outlay of $3,000 results in after tax cash flows of $500 after each of the next 10 years. What is the project's payback period? If the firm has a 5-year payback requirement, should it accept the project? Explain.