1. Consider a company with a net income of $100 million and a target capital structure of 60% equity and 40% debt. If the company plans a new capital budget of $90 million dollars what is the companys retained earnings and dividend payout ratio according to the residual dividend model?

2. The risk-free interest rate in the USA is expected to be 3% and the risk-free interest rate in Mexico is expected to be 7% over the next three years. If the current spot exchange rate is 20 Mexican pesos per dollar, what is the expected future exchange rate in pesos per dollar in three years according to Interest Rate Parity (IRP)?

3. Consider an unleveraged company worth $150 million. The average investor in the company faces a 15% tax rate on equity investments and a 40% tax rate on debt investments? If debt of $50 million is borrowed and invested by the company and the company faces a 40% corporate tax rate, what is the new value of the company?

Please pick the ones you can solve