1. Tubby Toys estimates that its new line of rubber ducks will generate sales of $6.10 million, operating costs of $3.10 million, and a depreciation expense of $0.10 million. If the tax rate is 40%, what is the firm’s operating cash flow?
2. A San Francisco Chronicle columnist offered the suggestion that, rather than spreading your investment dollars across many stocks (thus diluting the effect of the performance of any one stock), you’d be better off putting all your money in one really good stock. This advice is dead wrong in at least two ways. Explain the columnist’s mistakes.