1) LDI can produce 63,000 parts per year. At this level, the degree of operating leverage is 2.85. Fixed costs are $140,000 annually. What is the operating cash flow at this level?

2) Concering diversifiable risks, which of the following statements is true? Answer from a-e below.

   I. Diversifiable risks can be essentially eliminated by investing in the market portfolio.

   II. The market rewards investors for diversifiable risk by paying a risk premium.

   III. Diversifiale risks are generally associated with an individual firm or industry.

   IV. Beta measures diversifiable risk.

       a. I and III only.

       b. II and IV only.

       c. I and IV only.

       d. II and III only.

       e. I, II, and III only.