16. The covariance between Van Goughs common stock returns and the return on the market portfolio is 0.008. The variance of the market 0.02. Which of the following comes closest to the beta of Van Goughs common stock?

A. 0.6

B. 0.4

C. 0.1

D. 0.2

17. According to the M&M tax model, the value of a levered firm is equal to the value of an unlevered firm plus the tax shield from debt. What does this model imply about the firms optimal capital structure?

	A.	0 % debt
	B.	25% debt
	C.	100% debt
	D.	50% debt

18. Northern Wood Products is currently an all-equity firm with 16,000 shares of stock outstanding and a total market value of $352,000. Management is considering raising additional $88,000 either by issuing additional 1000 common stocks at $88 each, or by issuing 88 bonds with a 6 percent coupon rate and $1000 face value. If the firm is expected to have EBIT of $26,000,

what will the earnings per share be if they issue additional stock? Assume tax rate of 50%.

	A.	0.76
	B.	0.36
	C.	0.65
	D.	0.48

PLEASE ANSWER ALL QUESTIONS