1. Great Enterprises is analyzing two machines to determine which one they should purchase. The company requires a 13 percent rate of return and uses straight-line depreciation to a zero book value. Machine A has a cost of $285,000, annual operating costs of $8,500, and a 3-year life. Machine B costs $210,000, has annual operating costs of $14,000, and has a 2-year life. Whichever machine is purchased will be replaced at the end of its useful life. Great Enterprises should select machine _____ because it will save the company about _____ a year in costs.
A; $10,688
A; $ 17,716
B; $5,500
B; $14,987
B; $16,204
2. Sb Mills is expected to pay an annual dividend of $1.50 a share next year. The market price of the stock is $32.50 and the growth rate is a 0.5% what is the firm's cost of equity?
a. 9.77 percent
b. 9.24 percent
c. 9.55 percent
d. 13.12 percent
e. 15.25 percent