1. Kiss the Sky Enterprises has bonds on the market making annual payments, with 12 years to maturity, and selling for $930. At this price, the bonds yield 11.0 percent. What must the coupon rate be on the bonds?
2. A firm is considering a project that will generate perpetual after-tax cash flows of $25,000 per year beginning next year. The project has the same risk as the firm's overall operations. Equity costs 15% and debt costs 6% on an after-tax basis. The firm's D/E ratio is 1.2. What is the most the firm can pay for the project and still earn its required return?