1. You won a lottery and are offered a choice between one lump sum payment of $70 million today or ten annual payments of $10 million per year starting today. If you can earn an interest rate of 9.35% per year, which option is preferable? (Assume you spend none of the money).
2. Benefits and Costs of government intervention in free trade.
3. Given riskfree rate=5%, expected return on the market portfolio= 11%, Beta for the company= 1.2, cost of debt capital before tax = 9%, statutory corporate tax rate= 30%, proportion of equity=0.8, proportion of debt = 0.2, proportion of tax reclaimed by shareholders: 75%, how do we find after tax cost of debt capital? The answer is given as 8.33%.