1. Yahoo Finance reports that IBM has an equity beta equal to 1.22 and a market capitalization of $129 billion. If the market value of IBM's debt is $135 billion, what is IBM's after-tax WACC according to the Capital Asset Pricing Model (CAPM)? Assume that IBM's current cost of debt is 3.5%, IBM's marginal tax rate is 26%, the risk-free rate is 1%, and the market risk premium is 8%.

2. Compton Manufacturing recently spent $100 million to invest in some manufacturing equipment. The company expects that the equipment will have a useful life of four years and the company has a marginal tax rate of 26%. What is the present value of the depreciation tax shield assuming a discount rate of 10%?

3. AT&T paid an annual dividend of $2.08 per share over the past year and their common stock is currently trading at $28.00 per share. Assuming that the dividends will continue to grow at a constant rate forever, use the divident discount model to find the implied growth rate for the dividends. Assume that the appropriate discount rate for AT&T's stock is 10%.

4. A Wall St. Analyst has forecast startup company First One's free cash flows for the next five years to be the following: -$100, $12, $24, $28, and $120. After that, the free cash flows are expected to grow at a rate of 3% forever. If the appropriate cost of captial for First One is 18%, what is the present value of the company?

5. Your friend asks for investment advice. Currently, she has $10 million invested in a portfolio that has an expected return of 5.0% and a volatility of 7.0%. Suppose the risk-free rate is 1.0%, and the market (tangent) portfolio has an expected return of 10.0% and a volatility of 9.5%. Assume that the CAPM holds and she can only invest in the market portfolio and/or US Treasuries (i.e., the risk-free asset). To maximize her expected return without increasing her volatility, which portfolio would you recommend? Specifically, how much money would you recommend her to invest in Treasuries and how much in the market portfolio?

6. Company X expects to have free cash flow in the coming year of $200 million, and its free cash flow is expected to grow at a rate of 3% per year thereafter. Company X has an equity cost of capital of 13% and a debt cost of capital of 3.5%, and it pays a corporate tax rate of 26%. If Company X maintains a debt-equity ratio of 0.25, what is the value of its interest tax shield?