1. A project requires $428,000 of equipment that is classified as seven-year property. What is the depreciation expense in Year 3 given the following MACRS depreciation allowances, starting with Year 1: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent?
A) $56,038.15
B) $48,447.30
C) $74,857.20
D) $104,817.20
E) $89,038.42
2. How does the trade-off theory point to an optimal capital structure, that is an optimal amount of debt and equity? (Be sure to discuss the agency, bankruptcy, and financing costs in addition to tax shield benefits of debt)