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    Cost of Equity Questions

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    1. Blakeslee Machinery announced this morning that their next annual dividend will be increased to $2.10 a share and that future dividends will be lowered by 2 percent per year. The stock price after the announcement settled at $16 a share. What is the firm's cost of equity?
    a. .33%
    b. 9.33%
    c. 11.13%
    d. 13.33%
    e. 15.13%

    2. Baxter Industries paid their annual dividend of $1.34 on their common stock. The company predicts that the dividend will increase by 3.5 percent each year indefinitely. What is the firm's cost of equity if the stock is selling for $43 a share?
    a. 4.89%
    b. 6.62%
    c. 6.73%
    d. 7.12%
    e. 7.38%

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