1. A company expected to have free cash flow in the coming year of $9 million, and this free cash flow is expected to grow at a rate of 3% per year thereafter. The company has an equity cost of capital of 12.70%, a debt cost of capital of 6.5%, and it has a 21% corporate tax rate. If the company currently maintains a .5 debt to equity ratio, what is the present value of the interest tax shield in $ million?

		$0.00
		$1.99
		$4.73
		$7.47
		$10.21

2. A company has 30 million shares outstanding with a market price of $20 per share and no debt. The company has had consistently stable earnings, and pays a 34% tax rate. Management plans to borrow $150 million on a permanent basis through a leveraged recapitalization in which they would use the borrowed funds to repurchase outstanding shares. If the company can repurchase its existing shares at $20 per share, what will the new share price be after the transaction?

		$21.33
		$21.80
		$22.27
		$22.74
		$23.21