1. A bond issued by the State of Pennsylvania provides a 4% yield. What yield on a Synthetic Chemical Company bond would cause the two bonds to provide the same after-tax rate of return to an investor in the 40% tax bracket?
a) 11.42% b) 6.67% c) 10.77% d) 11.09%
2. FIN350 Inc. had the following data for 2010, in millions: Net income = $600; after-tax operating income [EBIT (1-T)] = $700; and Total assets = $2,000. Information for 2011 is as follows: Net income = $825; after-tax operating income [EBIT (1-T)] = $1,125; and Total assets = $3,000. How much free cash flow did the firm generate during 2011?
a) $644 b) $125 c) $481 d) $625