1. The firm you founded currently has 13 million shares, of which you own 3 million. You are considering an IPO where you would sell 3 million shares for $ 17 each. If all of the shares sold are primary shares, how much will the firm raise? What will be your percentage ownership of the firm after the IPO?
2. A firm is financed with 20% long-term debt and 80% common stock. Assume that the estimated cost of equity is 15% and the cost of comparable debt is 5%. The corporate tax rate is 40%. Compute the WACC.
3. Your grandmother invested $3,000 in an account in your name several years ago. The account has paid an average annual rate of 4.5 percent. Today, the account is worth $8,265. How long ago did your grandmother invest this money for your benefit?