1. JL Lumber has a debt-equity ratio of .62. The firm's required return on assets is 12 percent and its current cost of equity is 15.60 percent. What is the firm's pretax cost of debt? Ignore taxes.
A. 6.45%
B. 6.03%
C. 6.25%
D. 6.40%
E. 6.19%
2. In the decline stage, we know that both profit and cash flow will be positive because
a. The product will be terminated when either turns negative
b. The product has been proven in the marketplace
c. Profit and cash flow are not positive in the decline stage
d. Profit is positive but cash flow is negative