1. Bellamee Company has bonds outstanding with five years to maturity and a face value of $5,000. The bonds are currently priced at their face valuet. If he bonds have a coupon rate of 12 percent, then what is Bellamee's after-tax cost of debt financing (in percent) if the tax rate is 50 percent?

2. If a firm has the option of leasing some factory space to another firm or utilizing it for another product line, then if the firm chose the product line how should it handle the lost lease payments on the factory space for capital budgeting purposes?

a. Ignore it.

b. Include it as an opportunity cost.

c. Include half of it as additional revenue for the project.

d. Include the property taxes but nothing else.