Question $1(2$ points$)$

For company ABC, the earnings before interest and tax is $425$ and the current year

interest expense is $125.$ The marginal tax rate is $35\%.$ What's the interest coverage

ratio for ABC $?$

A

Given the current treasury bond rate is $5\%.$ What's the estimated cost of debt for

ABC $?$

Question $2($Bonus$)(1$ point$)$

If you do not believe marginal investors are well$-$diversified, then you can still use the

CAPM to price cost of equity.

True

False