Depreciated straight-line to zero over seven-year tax life

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Reference no: EM132021466

1. A firm is expected to pay an annual dividend of $1.10 per share next year. The market price of the stock is $21.80 and the growth rate is 4.50%. What is the firm's cost of equity?

a. 9.24%

b. 10.54%

c. 9.77%

d. 9.55%

e. 7.91%

2. Consider an equipment asset that costs $142,000 and is depreciated straight-line to zero over its seven-year tax life. The asset is to be used in a four-year project. At the end of the project the asset can be sold for $65,000. The tax rate is 30%. What is the aftertax salvage value?

a. $66,242.86

b. $45,500.00

c. $63,757.14

d. $53,805.15

e. $48,100.00

Reference no: EM132021466

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