1. In order to reduce risk, the firm would seek to enter a business that
a. has a zero correlation with its present business.
b. has a high positive correlation with its present business.
c. has a high negative correlation with its present business.
d. has a high negative variation with its present business.
2. Kivenan Corporation has just chosen to undertake a project with a cost of $55,000. The project is expected to generate earnings of $25,000 per year for 3 years. Assume that the company's tax rate is 34% and that the asset is part of the 3-year MACRS category (33% first year depreciation).
Calculate the cash flow from the project in year 1.
a. $16,800
b. $16,667
c. $22,671
d. $20,250
e. $15,100