1) A firm has expected before-tax earnings of $100 million a year forever, starting next year. It is financed with 30% debt at an expected interest rate of 6% a year and 70% equity with an expected cost of 11% a year. If the firm is in the 35% tax bracket, what is its NPV?

Question options:

$684.21 million

$732.81 million

$1,052.63 million

$1,123.60 million

2) The overall cost of capital for Canton Corporation is 10%. The firm is financed with 30% debt that offers a promised return of 15% and has an expected return of 8%. Canton is in the 40% marginal tax bracket.

Refer to the information above. What is Canton's weighted average cost of capital?

Question options:

	7.6%
	8.6%
	9.7%
	9.0%