1. The Heuser Company's currently outstanding bonds have a 10% coupon and a 12% yield to maturity. Heuser believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 40%, what is Heuser's after-tax cost of debt? Round your answer to two decimal places.
2. Florida Hospital wants to buy a new ambulance in five years. The ambulance is expected to cost $100,000 at that time. If the hospital can find an investment yielding 10% over that three-year period, how much would the hospital have to invest now in order to accumulate $100,000 at the end of the five years? PLEASE SHOW YOUR WORK.