1. ECB borrows $1750000 USDs by issuing 4-year bonds. ECB's cost of debt is 5.5%, so it will need to pay $96250 USDs in interest each year for the next 4 years, and then repay the principal $1750000 USD in year 4. ECB's marginal tax rate will remain 35 throughout this period. By how much (in USDs) does the interest tax shield increase the value of ECB?
2 The value of company's operations is $400 million. The company's balance sheet shows $20 million in short-term investments that are unrelated to operations. The balance sheet also shows $90 million in notes payable, $30 million in long-term debt, and $40 million in preferred stock. If the company has 10 million shares of stock, what is your best estimate for the stock price per share?