1. When evaluating whether it is more cost effective to collect garbage using city crews or to privatize this service, which of the following best describes how indirect costs should be treated?

a. all indirect costs should be excluded

b. the "sunk cost" portion of indirect costs should be excluded, but all other indirect costs should be included

c. only the indirect costs that are "relevant costs" should be included

d. all indirect costs should be included

2. What is the equation for the security market line, i.e. what is the CAPM?

E(Rj) = Rm + Bm[E(Rm) - Rf]

E(Rm) = Rf + Bj[E(Rm) - Rf]

E(Rj) = Rm + Bj[E(Rm) - Rf]

E(Rj) = Rf + Bj[E(Rm) - Rf]

E(Rj) = Rf + Bm[E(Rm) - Rf