2.ABC, Inc. had sales revenue of $50,000 and $57,000 in fiscal years 2005 and 2006, respectively. Cost of goods sold was $32,000 and $39,000, respectively. The ending inventory was $7,000 and $8,000, respectively. ABC's revenue growth rate, gross profit margin and inventory turnover in 2007 will be identical to 2006. Calculate the projected average inventory in fiscal year 2007.

1. $8,140.63
2. $9,140.63
3. $10,150
4. $13,000

3.XYZ, Inc. is considered as being above average risk and so its market equity beta is 1.8. Currently, the default free rate on long term govt. securities is 4% and the market risk premium is 9%. What is the cost of equity for XYZ?

A. 12.8%

B. 12.2%

C. 12.6%

D. 20.2%