1. A company has $10 million of debt outstanding with a coupon rate of 8%. Currently the yield to maturity on these bonds is 10.5%. If the firm's tax rate is 40%, what is relevant cost of debt financing to this company?
2. What is the WACC for a firm financed with 30% debt if the debt investors require a return of 12.5% and equity investors require a 16% return? The corporate tax rate is 20%.
3. Is it better to purchase shares of stocks during a bear market or a bull market? Take a position and justify your answer as you explain each market.