1. Assume you are considering two mutually exclusive machines and need to select one for a cost-cutting project. Which one of these sets of characteristics best indicates the use of the equivalent annual cost method of analysis?
A. Differing costs with no replacement at end of life.
B. Differing lives and planned replacement at end of life.
C. Differing lives with no replacement at end of life.
D. Differing manufacturers and differing operating costs.
E. Differing required returns with no replacement at end of life.
2. The dividend growth model cannot be used to compute the cost of equity for a firm that:
A. Pays an increasing dividend.
B. Reduces its dividend on a regular basis.
C. Has a dividend payout ratio of 100 percent.
D. Pays a constant dividend year after year.
F. Has a retention ratio of 100 percent.