1. An unlevered firm has expected earnings of $978,000 and a market value of equity of $9,200,000. The firm is planning to issue $3,200,000 of debt at 7.6 percent interest and use the proceeds to repurchase shares at their current market value. Ignore taxes. What will be the cost of equity after the repurchase?

12.25%

13.27%

14.53%

15.76%

16.05%

2. People Media has a cost of equity of 9.42 percent and a pretax cost of debt of 6.8 percent. The debt-equity ratio is .40 and the tax rate is 34 percent. What is the unlevered cost of capital?

8.21%

8.58%

8.87%

9.15%

9.48%

3. An investment project costs $20919 and has annual cash flows of $12039 for six years. What is the discounted payback period if the discount rate is 19 percent? (round answer to two decimal places)