1. A firm with a 40 percent marginal tax rate has a capital structure of 50,000 in debt and 150,000 in equity. What is the firm's weighted cost of capital if the marginal pretax cost of debt is 10 percent and the cost of equity is 12 percent?
2. Elaborate on the strength and weakness of NPV method. Discuss the decision that have to be made contemplating the replacing an older, existing asset with a newer, more cost efficient one.