1. You are considering an investment in Badger, LLC. You know that the firm’s total risk is 20%, its systematic risk is 0.8, the one-month treasury bill rate is 1.2%, the 30-year treasury rate is 3.0%, and the average market return is 7.0%. What is the expected return according to the CAPM?

a. 20.00%

b. 5.84%

c. 7.52%

d. 9.28%

e. 6.20%

2. You are analyzing a project and have developed the following estimates: unit sales = 3,100, price per unit = $215, variable cost per unit = $115, fixed costs = $164,000. The depreciation is $59,000 a year and the tax rate is 35 percent. What effect would the sale of one more unit have on the operating cash flow?

a. 60.90

b. 61.40

c. 61.80

d. 65.00

e. 65.70