1. A long-lost relative paid $120 000 for a house a number of years ago. You inherit the property and sell it for $2 800 000. Inflation is calculated at 17%p.a., calculated annually. How many years ago was the house purchased?

2. A firm has a capital structure with $100 million in equity and $100 million of debt. The cost of equity capital is 14% and the pretax cost of debt is 8%. If the marginal tax rate of the firm is 30%, compute the weighted average cost of capital of the firm.

11.1%

10.3%

11.7%

9.8%