1. If the slope of the best-fit line calculated by regressing a stock’s historic returns against the market’s historic returns is positive, then the stock:
A. has no unique (or firm-specific) risk.
B. is a good investment
C. is a bad investment.
D. has a positive beta.
E. has a negative beta.
2. Home Builder Supply, a retailer in the home improvement industry, currently operates seven retail outlets in Georgia and South Carolina. Management is contemplating building an eighth retail store across town from its most successful retail outlet. The company already owns the land for this store, which currently has an abandoned warehouse located on it. Last month, the marketing department spent $10,000 on market research to determine whether to build and open the new store. Which of the following should not be included as part of the incremental free cash flows for evaluating the proposed new retail store?
A. The cost of demolishing the abandoned warehouse and clearing the lot.
B. The expected loss of sales at its existing retail outlet, if customers who previously drove across town to shop at the existing outlet become customers of the new store instead.
C. The $10,000 in market research spent to evaluate customer demand.
D. Construction costs for the new store.
E. The value of the land if sold. There is currently an offer of $250,000 from an interested buyer