1. A firm has a D/E ratio of .30. Its debt is rated AA with a current yield of 4.375%. The rate for 10-year Treasuries is 2.9%, and the market risk premium is 650 basis points over the risk-free rate. Finally, it has a beta of 1.10. What is the firm's WACC if the firm has a marginal tax rate of 30%? (please show the calculations)
2. A Put option contract on the euro, with a strike price of $1.08 per EUR, is currently being traded for $329. If the current spot rate is $1.0714 per EUR, what is the implied time value on the option. Assume a contract size of 10,000 EUR.