11) Consider both statements. Statement 1. If a firm does not distribute dividends then the cost of equity for that firm is zero. Statement 2. The difference between a firms market capitalization and its accounting book value is a good measure of management's ability to create economic value. A- Only Statement 1 is True B- Only Statement 2 is True C- Both Statements are True D- Both Statements are False 17) The Alfred K. Ajax Business School is considering purchasing a $5,575 energy-efficient Philco Air Filtering system that will save the school $1,400 per year in operating costs for the next 5 years. The school plans to finance the system by taking out a 5 year loan. What is the maximum annual interest rate (HINT: cost of capital) that the business school can pay yet still break even on the $5,575 cost of the system. 0 9.32% O 7.70% O 8.10% O 5.58% O 6.75%

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