12) The Lumber Yard is considering adding a new product line that is expected to increase annual sales by $238,000 and cash expenses by $184,000 The initial investment will require $96,000 in fixed assets that will be depreciated using the straight line method to a zero book value over the 6 year life of the project The company has a marginal tax rate of 32 percent What is the annual value of the depreciation tax shield QUESTION 13 A portfolio beta is a weighted average of the betas of the individual securities which comprise the portfolio However, the standard deviation is not a weighted average of the standard deviations of the individual securities which comprise the portfolio Explain why this difference exists QUESTION 14 Explain the difference between systematic and unsystematic risk 17) A stock has an expected return of 11 percent, the risk free rate is 6 1 percent, and the market risk premium is 4 percent Calculate the stock's beta

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Question: 12) The Lumber Yard is considering adding a new product line that is expected to increase annual sales by $238,000 and cash expenses by $184,000.

12)

The Lumber Yard is considering adding a new product line that is expected to increase annual sales by $238,000 and cash expenses by $184,000. The initial investment will require $96,000 in fixed assets that will be depreciated using the straight-line method to a zero book value over the 6-year life of the project. The company has a marginal tax rate of 32 percent. What is the annual value of the depreciation tax shield?

QUESTION 13

A portfolio beta is a weighted average of the betas of the individual securities which comprise the portfolio. However, the standard deviation is not a weighted average of the standard deviations of the individual securities which comprise the portfolio. Explain why this difference exists.

QUESTION 14

Explain the difference between systematic and unsystematic risk.

17) A stock has an expected return of 11 percent, the risk-free rate is 6.1 percent, and the market risk premium is 4 percent. Calculate the stock's beta.

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