1. Southwest U's campus book store sells course packs for $20 each. The variable cost per pack is $10, and at current annual sales of 50,000 packs, the store earns $75,000 before taxes on course packs. How much are the fixed costs of producing the course packs?
$325,000
$205,000
$265,000
$425,000
2. A major contribution of the Miller model is that it demonstrates, other things held constant, that
personal taxes have no effect on the value of using corporate debt.
personal taxes increase the value of using corporate debt.
financial distress and agency costs reduce the value of using corporate debt.
personal taxes lower the value of using corporate debt.