A firm with a 12 percent cost of capital is considering a pr…

A firm with a 12 percent cost of capital is considering a project for this year’s capital budget.  The project’s expected after-tax cash flows are as follows: Year: 0 1 2 3 4 Cash flow: -$5,000 $2,400 $2,200 $2,400 $2,200 Calculate the project’s profitability index (PI).

Li & Associates’ common stock currently trades at $45 a shar…

Li & Associates’ common stock currently trades at $45 a share.  It is expected to pay an annual dividend of $2.48 a share at the end of the year (D1 = $2.48), and the constant growth rate is 7.8 percent a year.  What is the company’s cost of common equity if all of its equity comes from retained earnings?