1. AMG needs to finance a new 250,000 investment opportunity. 50% will be raised by issuing a new 5- year bond and the remaining amount by issuing common stock. AMG has outstanding a 5-year 4.00% coupon bond that yields 5.00%. T-bills yield 2.50% the market risk premium is 7.00% and the firm's beta is 1.50. The applicable tax rate is 20%. a. The annual coupon payment on the bonds reduces the firm's taxes by what dollar amount? b. What is the firm's after-tax cost of debt? c. What is the firm's cost of equity capital? d. If the after-tax cost of debt is 3.00% and the cost of equity is 8.00% calculate the WACC. 2. A company intends to purchase a new machine costing 300,000. The cost of the machine will be depreciated according to the following schedule: 50%, 30%, and 20%. The applicable tax rate is 20%. a. What is the depreciation tax shield for year 2? b. At the end of year 2 the machine is sold for 60,000. What is the after-tax proceeds on the machine? c. What is the book value at the end of year 1