1)

Dorpac Corporation has a dividend yield of 1.2%. Its equity cost of capital is 7.8%and its dividends are expected to grow at a constant rate.

a. What is the expected growth rate of Dorpac's dividends?

b. What is the expected growth rate of Dorpac's share price?

a. What is the expected growth rate of Dorpac's dividends?

a. The growth rate will be %. (Round to one decimal place.)

b. What is the expected growth rate of Dorpac's share price?

What is the expected growth rate of Dorpac's share price

A.With constant dividend growth, the share price is expected to grow at rate g=6.6%.

B.With constant dividend growth, the share price is expected to grow at rate

g=1.2%.

C.With constant dividend growth, the share price is expected to grow at rate

g=6.6%1.2%=5.4%.

D.With constant dividend growth, the share price is expected to grow at rate

g=7.8%.

2) A garage is comparing the cost of buying two different car hoists. Hoist A will cost $20,000, will require servicing of $1000 every two years, and last ten years. Hoist B will cost $15,000, require servicing of $800 per year, and last eight years. If the cost of capital is 7%, which is the better option, given that the firm has an ongoing requirement for a hoist?

A.Hoist A, since it has a greater equivalent annual annuity.

B.Hoist B, since it has a greater equivalent annual annuity.

C.Hoist A, since it has a greater present value (PV).

D.Hoist B, since it has a greater present value (PV).