Question 1: A graph shows a company's common stock returns on the Y axis and the market returns on the X axis. The slope of the regression line represents
a. range of NPVs
b. standard deviation
c. diversifiable risk
d. Beta
e. diversifiable risk and beta
Question 2: Risky projects can be evaluated by discounting certainty equivalent cash flows at the risk-free interest rate. True or False?
If the project's depreciation expense in year 4 is $36,000 and the firm's marginal tax rate is 30%, the cash flow consequence of depreciation in year 4 is
a. $10,800 tax expense
b. $25,200 tax expense
c. $10,800 tax savings
d. $25,200 tax savings
e. $36,000 tax savings
f. There is none.