Figure 3-11

question 65

Multiple Choice

Figure 3-11. The following four months of data were collected on utility cost and the number of labor hours in a factory.
Refer to Figure 3-11.Using the high-low method,compute the fixed cost of electricity.

• A)$13,740
• B)$10,860
• C)$6,400
• D)none of these are correct

Recognize the methodology for calculating the weighted average number of shares for EPS.

Understand the basics of creating a portfolio with both risky and risk-free assets.

Calculate the expected return and standard deviation for a given portfolio.

Identify the concept of the capital allocation line (CAL) and its significance.

---

Definitions:

Financial Leverage

The use of borrowed money to increase the potential return of an investment.

Unlevered Cost of Capital

The cost of capital for a company with no debt, reflecting the required rate of return on equity for an entirely equity-financed firm.

After-Tax Net Income

The amount of money a company or individual earns after all taxes have been deducted from the gross income, reflecting the actual profit.

Levered Firm

A company that employs debt in its capital structure, as opposed to an unlevered firm which is financed only through equity.