$1.$ The Denver Company currently has a bond issue outstanding which carries a coupon rate of $6\mathrm{.}4$ percent, makes semiannual payments, currently sells for $$967\mathrm{.}40,$ and matures in $8\mathrm{.}4$ years. Suppose Denver Company wants to issue another bond issue which will mature in $25$ years to expand its current operations. Assuming this new bond issue is similar in risk to the existing bonds outstanding, what coupon rate should Denver set on these new bonds if it wants them to sell at par?

$2.$ Gershwin Company is an all$-$equity firm that has projected sales of $$100$ million next year. Sales are expected to grow at $14$ percent for the following two years and then level off at $5$ percent thereafter. Costs and depreciation are $40$ and $20$ percent of sales, respectively. Net working capital and capital spending requirements are expected to be $10$ percent of sales. There are $6\mathrm{.}5$ million shares of stock outstanding, the applicable tax rate is $35$ percent, and investors require a return of $13$ percent for a company of this risk. Given free cash flow $($FCF$)$ of the firm is defined by the sum of the components on the left$-$hand side of the cash flow identity $($discussed in Chapter $2),$ answer the following:

a$.$ Compute Gershwin$$s FCF for years $13.$

b$.$ Compute the present value of the FCF for years $13.$

c$.$ Considering the growth rate in sales after year $3,$ compute the present value $($i$.$e$.$ t$=0)$ of all FCF for Gershwin.

d$.$ If you divide the value obtained in part c by the number of shares of stock outstanding, what would this represent?