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Corporate Finance , no pictures Q1: XYZ company has decided to take a bank loan for the amount of $20 million with interest charged at

Corporate Finance , no pictures

Q1: XYZ company has decided to take a bank loan for the amount of $20 million with interest charged at 6%. XYZ also has 3 million in equity shares outstanding trading at $10 each with a return to shareholders of 11%. The company has a tax rate of 35%. What is the after tax Weighted Average Cost of Capital? [2 Mark] [1 Mark] Q3: What is your return on exercising a call option which was purchased for $5 with an exercise price of $30? The stock price at expiration is $40? [2 Mark]

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