1. Fresh, Inc.’s target capital structure is 60% debt and 40% common stock. The company’s outstanding annual coupon bonds have a yield-to-maturity of 10%. The company’s common stock sells for $20 per share. D1 = $2.00 and g = 0.04. The tax rate is 40%. What is the company’s WACC?
a. 3.60%
b. 6.00%
c. 10.00%
d. 14.00%
e. None of the above
2. The account promises 3.2% interest compounded monthly.
a) How much should you put in the account today if you need $500 in 5 years?
b) If you put $100 in the account today, calculate the future value of this account after 5 years.
c) If you put $100 in the account on December 19th every year for 5 years, calculate the future value of this account after 5 years.