1. Fatima works as a sales representative and travels frequently. Her unreimbursed travel expenses for the year include: $2,700 for airfare, $1,450 for lodging, $110 for dry cleaning while away from home, $206 for taxi fare, and $574 for meals. What are her deductible travel expenses?

1) $4,356 2) $4,643 3) $4,753 4) $5,040

2. Wild Berry (WB) will remain in business for one more year. At the end of next year, the firm will generate a liquidating cash flow of $370M in a boom year and $150M in a recession year; both states are equally likely. The cost of equity for the unlevered firm is rU = 10%. The firm’s outstanding debt matures in a year and has a market (and book) value of $150M today. The interest payment on this debt is $15M at the end of next year. The corporate tax is τc = 35%. Corporate taxes is the only relevant market imperfection

If the discount rate for the interest tax shield is rITS = 5%, the value of the interest tax shield (PV (ITS)) is:

(A) $ 2.5M

(B) $ 5.0M

(C) $ 6.0M

(D) $ 7.5M