1. Medford Medical Company has expected earnings before interest and taxes of $3,850,000, an unlevered cost of capital of 8.67 percent, and a tax rate of 34 percent. The company has $9,240,000 of debt that carries a 6.0 percent coupon. The debt is selling at par value. What is the value of this firm?

$45,930,184

$42,487,266

$38,206,915

$35,217,693

$32,449,558

2. An all equity firm has a cost of capital of 11 percent. The firm is considering switching to a debt-equity ratio of .50 with a pretax cost of debt of 6.0 percent. What will the firm's cost of equity be if the firm makes the switch? Ignore taxes.

13.84%

13.50%

13.16%

12.87%

12.51%