1. Suppose a project financed via an issue of debt requires five annual interest payments of $12 million each year. If the tax rate is 35% and the cost of debt is 5%, what is the value of the interest rate tax shield?
A) $21.82 million
B) $18.18 million
C) $36.37 million
D) 14.55 million
2. A firm requires an investment of $30,000 and borrows $20,000 at 9%. If the return on equity is 15% and the tax rate is 30%, what is the firm's WACC?
A) 9.20%
B) 11.04%
C) 18.40%
D) 7.36%