1. Target bonds sell for $950 and have a par value of $1000, pay its 10% annual coupons semiannually, and mature in 10 years. Currently its cost of equity os 15%. The debt to equity ratio is 1.5. Calculate the new cost of equity if it pays down some of the debt by issuing more shares. Bringing its debt to equity ratio to 1. Corporate tax rate is 35%.

2. As a rule to get a permit to build 100 new townhomes, the government is requiring that a contractor builds a new public school 5 years after the land is bought. The land will cost $10 million. All townhomes are projeted to be sold over the next 4 years, producing net cash flows of $5 million at the end of each of the four years. At the end of the 5th year, the construction of the school will cost $12 million. What is the MIRR of this project is the contractor's cost of capital is 7%?