1. Brick House Cafe has a tax rate of 40 percent and paid total taxes of $42,500. The company had an interest expense of $18,900. What was the value of the interest tax shield?

$17,680

$8,247

$7,560

$12,280

$17,000

2. The Tree House has a pretax cost of debt of 5.6 percent and a return on assets of 11.5 percent. The debt–equity ratio is .61. Ignore taxes. What is the cost of equity?

16.47%

15.85%

15.59%

15.10%

7.90%