Use the Following Information to Answer the Question(s)below

question 35

Multiple Choice

Use the following information to answer the question(s) below. The risk-free rate of interest is 3% and the market risk premium is 5%.
-The cost of capital for the oil refining division is closest to:

• A)6.5%.
• B)7.0%.
• C)8.5%.
• D)10.0%.

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Definitions:

Inventory Estimate

An approximation of the value or quantity of inventory, used for accounting or planning purposes.

Retail Method

An accounting method to estimate ending inventory and cost of goods sold by using a proportional relationship between the retail value and cost of goods.

Estimated Ending Inventory

An approximation of the value of inventory a company has on hand at the end of an accounting period.

Gross Profit Rate

A financial metric that represents the proportion of money left over from revenues after accounting for the cost of goods sold.