1. Assume the total cost of a university education will be $300,000 when your child enters university in 18 years. You currently have $65,000 to invest. What annual rate of interest must you earn on your investment to cover the cost of your child's university education?
2. A company currently has a debt to total assets ratio of 35% and the beta of the company is 1.05. The company has a current cost of debt of 7.8% and a tax rate of 38%. The current risk-free rate is 4.5% and the market risk premium (the difference between the return on the market and the risk-free rate of return) is 4%. Companies with similar risk characteristics and 40% debt can borrow at 9.5%. Would the company lower its WACC if it increased its debt to 40%?