1. Which of the following is/are true for a stock with beta equal to 1.5 (Select the best choice below.)
I) The stock has a? 50% higher expected return than the market portfolio.
II) Given a market risk premium of? 10%, the expected return on the stock would be? 15%.
III) The stock has? 50% more systematic risk than the average stock.
A. I only
B. II only
C. III only
D. I and III only
E. I, II and III
2. A firm purchases equipment for a capital budgeting project. The equipment cost $1,900,000 and its useful life is 8 years. The equipment is expected to be sold for $500,000 at the end of the project's 7 year life. The tax rate is 32%. What is the equipment's after tax salvage value?
$340,000
$253,143
$501,500
$416,000