1. Corgi Consultants (CC) is expected to generate … EBIT of $7 million annually in perpetuity (starting in one year). CC is … equity financed, with 2 million shares outstanding and shareholders require a return of 9%. The corporate tax rate is 35%. CC is proposing … issue $5 million of perpetual bonds with an annual coupon of 6% … company uses the $5M, CC never increases or decreases its debt. … price should CC offer to repurchase shares, such that the reputation … is a 5% premium over the post-repurchase price?

A $26.15

B $26.73

C $27.25

D $27.35

E $29.13

2. The UK currently has a progressive income tax system on earnings. The rules are as follows:

Any earnings under 11,500GBP are taxed at 0%.

Any earnings between 11,500 GBP and 33,500GBP are taxed at 20%.

Any earnings between 33,500 GBP and 150,000GBP are taxed at 40%.

Any earnings above 150,000 GBP are taxed at 50%.

An executive earns 175,000 GBP gross. How much tax does he pay?

Give your answer in pounds to the nearest pound.