1. Use two different methods (method one calculates EBIT and invested capital, and method two calculates ROE) to calculate ROI given the following information for Carla Vista Corp.: sales = $480,000; cost of goods sold = $186,000; interest cost $24,500; T_c = 25 percent. The firm's debt (B = $245,000) accounts for 25 percent of the invested capital. Aftertax cost of debt is 7.5 percent.

Calculate ROI by 2 methods.

2. In the M&M notax world, calculate the value of the levered firm (V_L). Cost of unlevered equity (k_U) = 15 percent; cost of debt (k_D) = 8percent; debt (D) = $500,000; and NI = $470,000. What is the cost of levered equity?

Value of levered firm = ?

Cost of levered equity = ?