A firm in Australia earns a pretax profit of $A20 per share. Suppose that it pays a corporate tax of $6 per share (30 percent tax rate) in taxes. The firm pays the remaining $A14 in dividends to a shareholder in the 45 percent marginal tax bracket. What is the amount of additional tax paid by the shareholder under an imputation tax system?

Select one:

a.$A6.30

b.$A0.00

c.$A3.00

d.$A9.00

e.None of the above

Kelly Industries is given the opportunity to raise $5 million in debt for four years through a local government subsidized program. While Kelly would normally be required to pay 12 percent on its debt issues, the Hampton County program sets the rate at 9 percent. What is the NPV of this subsidized loan? Ignore taxes.

Select one:

a.$518,364.29

b.$296,007.41

c.$384,312.42

d.$455,602.40

e.None of the above