10. The manufacturing of mouse traps is considered a quite stable business. A national supplier is considering investing in another facility that generates an annual output of 20,000 units. Costs (including all costs for simplicity) are $1.8 per unit. No working capital is required. A 20,000 unit capacity facility costs $278,000 and has a 15 year life, with no salvage value. The cost of capital is 12% (assume no taxes). What is the equilibrium price (per unit) for setting up the new mouse trap facility if there is no economic rent?

Select one:

a. $2.85

b. $3.84

c. $5.85

d. $7.13

e. None of the above.

The expected return on the market portfolio is 15%, and the risk-free rate of return is 5%. An investment has a beta of .8 and offers an expected return of 15%.

Select one:

a. This investment has a negative net present value.

b. This investment has a positive net present value.

c. Need more information to decide if this is a good or bad investment.

d. This is a good investment because it earns more than the market rate of return.