Question

McQueen wishes to fund a scholarship at his alma mater. The university indicated that it requires a perpetuity of $2,000 to support the scholarship. How much is the amount he must give the university today if banks can pay 4% APR?

Question options:

	$100,000
	$63,000
	$50,000
	$150,000

Use the following information for the next 2 questions:

Tropical Slushie Shop recently provided their target capital structure. They want to maintain $80,000 in Debt with a before-tax cost of debt of 9%. Tax rate is 21%. They have $115,000 in common stocks with beta of 1.20, market return is 10% and risk-free rate is 3%.

19) How much is their cost of equity?

Question options:

	8.20%
	9.50%
	13.10%
	11.4%

How much is Tropical Slushie's cost of capital?

Question options:

	11.59%
	10.42%
	9.64%
	13.22%

Answer 1