a)

b)

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If Costco buys back $100 million of stock so that the Common Stock Par and Paid in capital decreases $100 million o This will be a cash inflow Revenues will decrease by $100 million today This will not affect cash as it is simply a Balance Sheet adjustment This will be a cash outflow This will cause the Net Income of Costco to decrease $100 million You are calculating the expected interest rate for Halbon Corporation. (This is a corporation) You have estimated the following information with the help of your Economics staff: The real risk free rate is 0.3%, the expected inflation rate is 1% per year, the maturity risk premium for a 10 year bond is 2.77 %, the maturity risk premium for a 30 year bond is 2%, and the default risk premium for Halbon Corp is 0.65% What is the expected interest rate on Halbon's 10 year bond? (Express in 4 decimal: 5.65% is.0565)