1. A firm paid a recent annual dividend of $1.60 per share and is expected to grow annually by 3% per year. The market price of the stock is $21. What is the firm's cost of equity?
10.62%
7.85%
7.62%
10.85%
2. Two-years ago, Trans-Siberian Airlines sold a $950 million bond issue to finance the purchase of new jet airliners. These bonds were issued in $1000 denominations with an original maturity of 12 years and a coupon rate of 12%. Determine the value today of one of these bonds to an investor who requires a 14% rate of return on these securities.
$626
$463
$897
$270