You are currently evaluating a potential stock purchase. As you are gathering information about the stock you notice a few things. First, you see that the expected rate of return on the market is 15%, and the risk free rate is 1.75%. The stock you are interested in has a beta of 1.3, and is currently priced to yield a return on 20% (expected return). If this is true then, what must also be true? Select one: a. The stock lies below the SML b. The stock is fairly priced c. The stock is underpriced d. The stock is overpriced e. The stock lies on the SML If everything else stays the same, then it must be true that as risk (rates) increases, present value (price) must what? Select one: Decrease. O Cannot be determined with the available information Does not change. Rises and then remains stable. Increase The Mighty Luchador Corporation has recently purchased an asset that cost them $11,000,000 and they intend to depreciate this asset straight-line to zero over its 10 year depreciable tax life. The asset is to be used in a 5 year project: and at the end of the project, the asset can be sold for $4,000,000. If the relevant tax rate is 18%, what is the after tax cash flow from the sale of this asset (after-tax salvage)? Select one: a. 4228627 b. 4270000 c. 4322336 d. 4298031 e. 4224856