1. IBM has just issued a callable (at par) 10 year, 6% coupon bond with quarterly coupon payments. The bond can be called at par in two year or anytime thereafter on a coupon maturity? What is the bond's yield to call? 2. Suppose you borrow $16000 when financing a gym which is valued at $30000. Assume that the unlevered cost of the gym is 15% and that the cost of debt is valued at 6%. What should be the cost of equity of your firm? If the debt-to-value ratio goes to 75%, what should be the cost of equity? What would be the WACC? 3. Company A needs to raise $8.5M for a new investment project. If the firm issues one-year debt, it may have to pay an interest rate of 12%, although the managers believe that 7.5% would be a fair rate given the level of risk. If the firm issues equity, they believe the equity may be underpriced by 9%. What is the cost to current shareholders of financing the project out of retained earnings, debt, and equity? 4. The income statement for E.C. Builders (ECB) is shown below. Given its marginal corporate tax rate of 35%, what is the amount of the interest tax shield for ECB in years 2010 through 2013? Calculate the present value of the tax shield, assuming that the interest rate of debt is 7%