1) Sand Key Development Company has a capital structure consisting of $20 million of 10% debt and $30 million of common equity. The firm has 500,000 shares of common stock outstanding. Sand Key is planning a major expansion and will need to raise $15 million. The firm must decide whether to finance the expansion with debt or equity. If equity financing is selected, common stock will be sold at $75 per share. If debt financing is chosen, 8% coupon bonds will be sold. The firm's marginal tax rate is 34%. Determine the level of operating income at which Sand Key would be indifferent between debt financing and equity financing.

a) $4,625,000

b) $5,675,000

c) $6,725,000

d) $6,200,000

e) $5,150,000

2) XYZ has 419,093 shares of common stock outstanding, a P/E ratio of 8, and $534,136 in net income. The board of directors has just voted in favor of a 4-for-1 stock split. You owned 252 shares before the stock split. What will be the total value of your investment after the split? SET YOUR CALCULATOR TO 4 DECIMAL PLACES. ROUND TO THE NEAREST WHOLE NUMBER AT THE END. FOR EXAMPLE, IF YOUR ANSWER IS 1700.5567, ENTER IT AS 1701.