1. Why is the degree of collateral as specified in the loan agreement of importance to a lender? If the book value of the collateral is greater than or equal to the amount of the loan, is the credit risk of a lender fully covered? Why or why not?
2. Could I Industries just paid a dividend of $1.25 per share. The dividends are expected to grow at a 22 percent rate for the next six years and then level off to a 3 percent growth rate indefinitely. If the required return is 13 percent, what is the value of the stock today?