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12) Gremlin Industries will pay a dividend of $1.75 per share this year. It is expected that this dividend will grow by 7% per year each year in the future. The current price of Gremlin's stock is $22.40 per share. What is Gremlin's equity cost of capital? A) 14% B) 15% C) 19% D) 17% 13) A company has stock which costs $41.50 per share and pays a dividend of $2.50 per share this year. The company's cost of equity is 10%. What is the expected annual growth rate of the company's dividends? A) 7.96% B) 15.92% C) 3.98% D) 11.94% 14, Two mutually exclusive investment opportunities require an initial investment of $5 million Investment A pays $2.0 million per year in perpetuity, while investment B pays $1.4 million in the first year, with cash flows increasing by 5% per year after that. At what cost of capital would an investor regard both opportunities as being equivalent? A) 17% B) 4% C) 8% D) 18% 24, Cameron Industries is purchasing a new chemical vapor depositor in order to make silicon chips. I will cost $7,000,000 to buy the machine and $10,000 to have it delivered and installed. Building a clean room in the plant for the machine will cost an additional $3 million. The machine is expected to raise gross profits by $4,500,000 per year, starting at the end of the first year, with associated costs of $1 million for each of those years. The machine is expected to have a working life of five years and will be depreciated over those five years. The marginal tax rate is 40%. What are the incremental free cash flows associated with the new machine in year 2? A) $1,398,000 B) $2,660,800 C) $2,098,000 D) $1,402,000

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