Q. (a) - A product is produced in three steps, with the variable cost added at each step and the yield at each step as listed below:

• Step 1 - Variable Cost Added at this Step: $30.00 ; Yield: 95%
• Step 2 - Variable Cost Added at this Step: $15.00 ; Yield: 90%
• Step 3 - Variable Cost Added at this Step: $20.00 ; Yield: 92%

What is the variable cost per good unit?

1. $69.98

2. $82.63

3. $60.40

4. $77.99

Q. (b) - When regressing beta, which of the following statements is true?

1. You should use daily data so you have more observations to work with

2. You should never use less than a 1 year time period, regardless of the sampling frequency

3. You should use as long of a time period as possible for the company

4. Weekly sampling is always the best choice

5. You cannot calculate a beta with one years worth of annual observations

Q (c) - Select the one true statement:

1. Beta > 1 indicates the company is safer than the average stock

2. The Beta of a risk free asset is 1

3. Beta < 1 is more likely to be associated with a company who sells affordable luxury products

4. The Beta of the market is assumed to be 0

5. Beta < 1 is more likely to be associated with a company who sells the basic necessities

Q (d) - Which of the following is associated with a lower cost of debt?

1. Borrowers lacking collateral

2. Higher levels of debt

3. A high degree of cash flow from operations relative to projected interest payments

4. Highly volatile performance in the recent past

5. Borrowers having a new unproven CEO