Exhibit 13-3 Exhibit 13-3 Gives Data on the Number

question 7

Multiple Choice

Exhibit 13-3 Exhibit 13-3 gives data on the number of tools a certain firm buys to use in its production process.Assume that the tools are expected to last indefinitely, that operating expenses are negligible, and that the price of the firm's output is expected to remain constant in the future.At an interest rate of 10 percent, the firm in Exhibit 13-3 should select

• A)the maximum number of tools available because price does not decrease as output increases
• B)the minimum number of tools available because price does not increase as output increases
• C)three tools
• D)four tools
• E)five tools

Recognize the limitations and testable hypotheses of the CAPM according to Roll.

Grasp the requirements for testing multifactor CAPM and APT, such as identification and testing of hedge portfolios.

Analyze the empirical performance of conventional and conditional CAPM, including the impact of human capital and firm size on model fit.

Understand the prerequisites for testing CAPM, including the details of the market portfolio.

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Definitions:

Net Income

The total profit of a company after all expenses and taxes have been subtracted from revenues.

Net Income

The total profit of a company after all expenses and taxes have been deducted from revenue.

Net Sales

The revenues from a company's primary activities after deducting returns, allowances, and discounts.

Working Capital Ratio

A financial metric measuring a company's ability to cover its short-term liabilities with its short-term assets.