Q1) Firm has notes payable of $1,546,000, long-term debt of $13,000,000, and total interest expense of $1,300,000. If firm pays 8 percent interest on its long-term debt, compute rate of interest does it pay on its notes payable?
Q2) Compute required rate of return for Mercury Inc., supoose that investors expect 5% rate of inflation in future. Real risk-free rate is equal to 3 percent and market risk premium is 5%. Mercury has beta of 2.0, and its realized rate of return has averaged 15 percent over last 5 years.