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1) Computing Investment Returns. You purchased one of Dxzilla Enterprise's 8% coupon bonds 1 year ago for= $1,045.30. These bonds make annual payments and mature 9 years from now. Assume you make a decision to sell your bonds today, when required return on bonds is 7.5%. If inflation rate was 3.2% over past year, what would be your total real return on investment?

2) Kemp Corporation is estimating whether to lease or buy equipment. The equipment will cost= $500,000 if bought and the complete amount will be financed by the bank loan at the annual interest rate of 10%. At the end of four years, company expects to sell the equipment for= $60,000. The equipment falls in MACRS 3-year class. Firm's tax rate is 30%. Lease terms call for payments of= $100,000 for 4 years, payable at the commencement of year.

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