1. Wine & Country has $378,000 of debt outstanding that is selling at par and has a coupon rate of 10 percent. The tax rate is 30 percent. What is the present value of the tax shield (assuming perpetual debt)?

A. $10,000

B. $11,340

C. $37,800

D. $113,400

E. None of the above

2. Millers Construction is analyzing a new project which requires an initial investment of $2,500,000 for equipment. The average flotation cost is 7 percent. What is the initial cost of the project including the flotation costs?

A. $2,500,000

B. $2,688,172

C. $2,675,000

D. $2,325,000

E. None of the above