1. Mulherin's stock has a beta of 1.25, its required return is 9.25%, and the risk-free rate is 2.30%. What is the required rate of return on the market? (Hint: First find the market risk premium.) Do not round your intermediate calculations.

2. Keys Printing plans to issue a $1,000 par value, 20-year noncallable bond with a 7.00% annual coupon, paid semiannually. The company's marginal tax rate is 40.00%, but Congress is considering a change in the corporate tax rate to 25.00%. By how much would the component cost of debt used to calculate the WACC change if the new tax rate was adopted? Do not round your intermediate calculations.