1. Increasing GDP growth and declining inflation are examples of:

I. Systematic Risk

II. Market Risk

III. Diversifiable Risk

IV. Unsystematic Risk

1. I and II only
2. I and III only
3. II and IV only
4. I, II and III only
5. I, II, III and IV

2. A firm is considering a project which requires an initial investment of $2.75 million. The target D/E ratio is 0.75. Flotation costs for equity are 7.15% and flotation costs for debt are 3.37%. What is the true cost, in dollars, of the project when flotation costs are considered?

A) $2.85 million

B) $2.91 million

C) $3.32 million

D) $3.46 million

E) $3.61 million