1. Rearden Metal is evaluating a project that requires an investment of $150 million today and provides a single pre-tax cash flow of $180 million for sure one year from now. Rearden decides to use 100% debt financing for this investment. The risk-free rate is 5% and Rearden's corporate tax rate is 40%. Assume that the investment is fully depreciated at the end of the year. The NPV of this project using the APV method is closest to: A. $10 millions B. $13 millions C. $42 millions D. $71 millions
2. You purchase one IBM July 120 put contract (equaling 100 shares) for a premium of $3. You hold the option until the expiration date, when IBM stock sells for $123 per share. You will realize a ______ on the investment.