1. Apple Inc. currently issues bonds that yield 9%. Its stock has a beta of 1.5, and the return on S&P 500 stock index is about 10%. T-bill rates are 3%. Apples target capital structure is 30% debt and 70% equity. If Apple is in the 35 percent tax bracket, calculate its WACC (weighted average cost of capital)?

a. 12.5%

b. 11.21%

c. 14.5%

d. 15.5%

2. A project in Malaysia costs $6,000,000. Over the next four years, the project will generate total operating cash flows of $3,500,000, measured in todays dollars using a required rate of return of 14 percent. What is the break-even salvage value of this project?

a. $4,222,400.4

b. $5,200,400.4

c. $4,888,258.4

d. $5,292,485.4