1. Chris purchased a call option on a stock for $200. The option gives him the right to purchase the stock at $30 per share until May 1st. On May 1st, the price of the stock is $28 per share. What is Chris’ return on the stock option?
2. The firm has decided on a capital structure consisting of 30% debt and 70% new common stock. Calculate the WACC and explain how it is used in the capital budgeting process.