1) XYZ Inc. issued $1,000, 25-year bonds five years ago at the coupon rate of= 10% compounded semi-annually. There were 3,000 bonds issued and similar bonds are now selling to yield= 12% annually. XYZ doesn’t have preferred stock and market value of equity is= $3,000,000. Compute component weight of debt based on market values.

i) 41%
ii) 46%
iii) 54%
iv) 59%

2) On July 1, 2011, a taxpayer comes in into 36-month lease. Terms of lease need the taxpayer to pay $1,000 a month. Based on value of automobile, inclusion amounts for 2011, 2012, and 2013 are $313, $590, and $602, respectively. If taxpayer uses car 70% for business, find out the net amount which can be deducted for lease expense in 2012?

a) $7,987
b) $5,705
c) $11,587
d) $12,000
e) $4,920