1. Currently, a company has a beta of 1.0 and its sales and profits are positively correlated with the overall economy. A new projects sales would be countercyclical in the sense that they would be high when the overall economy is down and low when the overall economy is strong. On the basis of this information, the proposed new project would:

a. Increase the firm's market risk

b. decrease the firm's market risk

c. Have low stand-alone risk

d. Increase the firm's corporate risk

2. Byron Books Inc. recently reported $16.5 million of net income. Its EBIT was $22.4 million, and its tax rate was 25%. What was its interest expense?

a. $0.5 million

b. $0.3 million

c. $0.2 million

d. $0.4 million

3. In its most recent financial statements, Nessler Inc. reported $63 million of net income and $756 million of retained earnings. The previous retained earnings were $722 million. How much in dividends were paid to shareholders during the year? Assume that all dividends declared were actually paid.

a. $77 million

b. $39 million

c. $29 million

d. $97 million