Question 1:

Kenny Ltd. has 1 million common shares outstanding. The beta on these common shares is 25, and they are trading at a price of $20 per share. Kenny paid a dividend of $1.75 per share last year. Analysts anticipate that these dividends will grow at an average annual rate of 2% for the foreseeable future. What is the component cost of new common equity if Kennys tax rate is 35% and flotation costs on new common equity are 6% before tax?

Question 2:

1. A firm is considering the following independent projects:

Project	Initial cash flow	NPV
A	120,000	15,646
B	70,000	5,342
C	100,000	12,558
D	80,000	6,320
E	95,000	12,825
F	110,000	9,225

The firm has a capital-budget constraint of $310,000. Assuming the projects are not divisible, which projects should be selected?