1. A firm's balance sheet shows $900 million in shareholder's equity and $690 million in debt. The debt has an average yield to maturity of 6.7%. The firm also has $100 million in cash and short-term investments that is not required for business operations. The required return on the firm's equity is 14.0%, the current share price is $31.00, and it has 57 million shares outstanding. The corporate tax rate is 22%. What is this firms WACC?

a. 8.0% b. 8.7% c. 9.8% d. 10.4% e.11.8%

2.

You estimate Bayleaf Inc. has free cash flows of $70 million arriving in 1 year, $74 million in 2 years, and $80 million in 3 years. After year 3, the long term growth rate of FCF will be 3% (thus year 4 FCF is $82.4 million). Bayleaf has $241 million in net debt and a weighted average cost of capital of 14%. What is your estimate of the Enterprise Value of Bayleaf (in millions)?

a. $330 b. $441 c. $522 d. $678 e. $766 f. $825