1. Suppose the real rate is 1%, the risk-free rate is 4%, maturity risk premium is 2%, inflation premium is 3%, the default risk on similar debt is 3%, and the liquidity premium is 2%. What is the nominal interest rate on this venture’s debt capital?
A. 11% B. 12% C. 13% D. 14% E. 15%
2. Gisborne Company reported the following financial data: Sales = $400, Costs = $200, Taxes = $50, Net Income = $150, Total Assets = $1,200, Debt = $600, and Equity = $600, Accounts Payable and Accrued liabilities = $0. Assets and costs are proportional to sales. Debt is not. A dividend of $90 was paid, and Gisborne wishes to maintain a constant payout to net income. Next year's sales are projected to be $480. What are additional funds needed?
(a) $240 (b) $132 (c) $ 60 (d) $168 (e) None of the above.