BEC Review

Question 1

cost of equity using the discounted cash flow

Answer 1

Cost of Equity = D/P + G

$3 Dividend next period
$30 stock price	+	10% Growth
	=	10% + 10%
	=	20% Cost of Equity Capital
Dividend divide by price plus growth rate

Question 2

contribution margin

Answer 2

Sale price minus variable costs
Variable costs include:
Direct materials
Direct labor
Variable mfg. O/H
Variable S&A