1. a) Erim Ltd. has ten million shares of stock outstanding selling at $23 per share and an issue of $50 million in 9 percent, annual coupon bonds with a maturity of 17 years, selling at 93.5 percent of par. If Erim1 weighted average tax rate is 34 percent, its next dividend is expected to be $3 per share, and all future dividends are expected to grow at 6 percent per year, indefinitely, what is its WACC? (13 marks)

2. b) Discuss the limitation would a firm face in accepting all the positive NPV project Explain, the overall financial rule should managers follow when choosing the portfolio of projects to accept? (7 marks)