1. Washington Inc. just paid its first annual dividend of $0.20 a share. The firm plans to increase the dividend by 4 percent per year indefinitely. What is the firm's cost of equity if the current stock price is $10 a share?
5.11 percent
7.24 percent
6.22 percent
8.11 percent
2. The Texas Inc. has a cost of equity of 16.5 percent and a pre-tax cost of debt of 9.4 percent. The firm's target weighted average cost of capital is 13 percent and its tax rate is 30 percent. What is the firm's debt-equity ratio?
0.54
0.46
0.37
0.69