Which Three of the Following Are Among the Difficulties Encountered

question 17

Multiple Choice

Which three of the following are among the difficulties encountered when computing required rates of return?

• A) Obtaining the riskfree rate
• B) Estimating the equity risk premium
• C) Creating a maximised gearing level
• D) The unreliability of the CAPM's beta

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Definitions:

Contribution Margin

The difference between the sales revenue of a product and its variable costs, used to cover fixed costs and contribute to profit.

Variable Costing

An accounting method that only assigns variable costs to inventory, treating fixed costs as expenses in the period they are incurred.

Variable Costing

An accounting practice that only factors in variable production expenses (like direct materials, direct labor, and variable manufacturing overhead) into the cost of goods.

Unit Product Cost

The total cost (including materials, labor, and overhead) divided by the number of units produced, representing the cost to produce a single unit of product.