Question 32 George is interested in buying one of the two local businesses on sale: a Coffee Shop or a Shoe Store, The cashflows of both the businesses are shown below. George can borrow from a bank at a rate of 7.00% to buy Coffee Shop and 6.00% to buy Shoe Store Coffee Shop Shoe Store Year -$100,000 $100,000 0 (Purchase Price) $7,188 $51,750 1 $21,562 $38,812 2 $40,250 $28,750 3 $50,315 $21,563 4 $57,500 $14,375 5 How much is the crossover rate of these projects? At crossover rate, both projects have the same NPV. Enter your answer in the following format: 0.1234, Hint: Answer is between 0.0917 and 0.11 Question 40 ABC software is trying to establish its optimal capital structure. It currently has 30% debt and 70% equity. However, the firm CEO believes that the firm should use more debt. The risk-free rate is 3% and the market risk premium is 5% The firm's tax rate is 35% and the cost of equity is 10%, as determined by the CAPM. Assume that the firm changed its capital structure to 40% debt and 60% equity How much should be the new cost of equity for this company? Enter your answer in the following format: 0.1234; Hint #1: Answer is between 0.0944 and 0.1291