1) The Down and Out Co. just issued a dividend of $2.51 per share on its common stock. The company is expected to maintain a constant 4 percent growth rate in its dividends indefinitely. If the stock sells for $50 a share, what is the company's cost of equity? (Do not round your intermediate calculations.)

rev: 09_20_2012

9.02%

9.22%

9.68%

5.3%

8.76%

2) The Up and Coming Corporation's common stock has a beta of 1.5. If the risk-free rate is 3.5 percent and the expected return on the market is 15 percent, what is the company's cost of equity capital? (Do not round your intermediate calculations.)

rev: 09_20_2012

20.75%

21.58%

21.79%

19.71%

26%