1. What is the approximate yield to maturity (YTM) of a bond that is currently selling for $1,150 in the market place? The annual bond has 20 years remaining until maturity and pays a 14% coupon. (Assume annual interest payments and discounting.)
2. Taggart Transcontinental is considering a $250 million investment to launch a new rail line. The project is expected to generate a free cash flow of $32 million per year forever, and its unlevered cost of capital is 8%. Taggart's marginal corporate tax rate is 35%. Assuming that to fund the investment Taggart will take on $250 million in permanent debt and ignoring issuance costs, the NPV of Taggart's new rail line is closest to: