1. A firm purchases equipment for a capital budgeting project. The equipment cost $1,900,000 and its useful life is 8 years. The equipment is expected to be sold for $500,000 at the end of the project's 7 year life. The tax rate is 32%. What is the equipment's after tax salvage value?
2. You have collected the following data: the company's outstanding bonds have 15 years to maturity, the annual coupon rate of 7% and the face value of $1,000. They sell for S 1,020. The new bonds will incur flotation cost F 5%. Tax rate is 35%. What is the after-tax cost of debt?