1. Broadly speaking what is the difference between debt and equity?
Equity has a higher claim than debt if the firm goes bankrupt.
Equity implies partial ownership in the firm while debt is a liability to the firm.
Dividends on equity are income tax deductible while interest on debt is NOT income tax deductible.
2. King Fisher Aviation is expected to pay the following dividends over the next four years:
$12.00
$5.00
$7.00
$3.00
Afterwards the company anticipates paying a constant 4%. If the required return on the stock is 15 percent, what is the current share price?