1. The Down and Out Co. just issued a dividend of $2.41 per share on its common stock. The company is expected to maintain a constant 6 percent growth rate in its dividends indefinitely. If the stock sells for $35 a share, what is the company's cost of equity? (Do not round your intermediate calculations.)
12.89% 13.96% 12.63% 13.3% 7.47%
2. The Up and Coming Corporation's common stock has a beta of 1. If the risk-free rate is 4.5 percent and the expected return on the market is 11 percent, what is the company's cost of equity capital? (Do not round your intermediate calculations.)
11.44% 11.55% 15.5% 10.45% 11%