What is shamas cost of internal equity

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Reference no: EM131616139

1. Shamas Famous Restaurants expects to pay a common stock dividend of $1.50 per share next year (d1). Dividends are expected to grow at a 4% rate for the foreseeable future. Shamas’ common stock is selling for $18.50 per share and issuance costs are $3.50 per share. What is Shamas cost of internal equity?

A. 20.59%

B. 12.11%

C. 14.00%

D. 10.00%

2. Poon’s Noodle House is considering replacing their noodle-processing machine. The current machine was purchased 4 years ago at a total cost of $20,000. It is being depreciated straight-line to a zero value over 8 years. If Poon sells the noodle-processing machine for $10,000, what is the after-tax cash flow to Poon’s Noodle House? Use 40% for the effective tax rate.

A. $6,000

B. $4,000

C. $10,000

D. $14,000

Reference no: EM131616139

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