1. (You may have to choose more than one answers) Howell Petroleum is considering a new project that complements its existing business. The company already spent $5 million to send questionnaire to consumers for marketing research. The machine required for the project costs $3.6 million. The machine will be depreciated down to zero over its four-year economic life using the straight-line method. Cost of goods sold and operating expenses related to the project are predicted to be 30 percent of sales, and interest expense is expected to be $10,000. Howell also needs to add net working capital of $100,000 immediately. The additional net working capital will be recovered in full at the end of the project's life. The corporate tax rate is 35 percent. The required rate of return for Howell is 15 percent. Choose ALL relevant expenses to compute free cash flows.

marketing research expenditure of $500,000

expenditure to buy the $3.6 million machine

costs of goods sold

interest expense of $10,000

net working capital of $100,000

2. Standard deviation measures _____ risk while beta measures _____ risk.

A. diversifiable; undiversifiable

B. undiversifiable; diversifiable

C. total; undiversifiable

D. total; diversifiable

E. asset-specific; market