1. Which of the following statements is true?
A. A debt-free firm will always have zero operating leverage
B. A debt-free firm will always have a break-even point of zero
C. The business risk of a firm generally rises as the degree of operating leverage increases
D. Firms with high break-even levels suffer from high systematic risk exposure
2. The common stock of Eddie's Engines, Inc. sells for $44.18 a share. The stock is expected to pay $2.60 per share next year. Eddie's has established a pattern of increasing their dividends by 4.7 percent annually and expects to continue doing so. What is the market rate of return on this stock?
5.75 percent
10.59 percent
13.24 percent
16.99 percent
5.89 percent