1. XYZ bonds have a 7% coupon rate paid quarterly. The par value is $1,000 and the bonds mature in 18 years. If the bonds currently sell for $920, what is the pre-tax cost of debt? A. 9.23 B. 8.78 C. 7.83 D. 7.56
2. XYZ Co. stock sells for $42 and just a paid a dividend of $5.15. Dividends are expected to grow at a rate of 4% forever. What is the cost of common equity? A. 16.75 B. 10.70 C. 12.85 D. 9.46