A Manager Believes His Firm Will Earn a 7

question 46

Multiple Choice

A manager believes his firm will earn a 7.5 percent return next year. His firm has a beta of 2, the expected return on the market is 5 percent, and the risk-free rate is 2 percent. Compute the return the firm should earn given its level of risk and determine whether the manager is saying the firm is undervalued or overvalued.

• A) 8 percent, undervalued
• B) 8 percent, overvalued
• C) 12 percent, undervalued
• D) 12 percent, overvalued

Understand diverse strategies to achieve time, quality, or cost reduction in organizations.

Recognize the benefits of hybrid supply structures in organizational design.

Comprehend the influence of organizational structure on supply processes, internal relationships, and systems.

Acknowledge the role of standardization in lowering the total cost of ownership.

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Definitions:

Debt

Money owed by one party to another under the condition of repayment, often including interest charges.

Profitability

The capability of a business to generate earnings greater than its expenses over a specific period, resulting in a profit.

Liabilities To Stockholders' Equity

Liabilities to Stockholders' Equity ratio indicates the financial leverage of a company, comparing the total liabilities to the total stockholders' equity to assess financial health.

Profitability

A measure of how much profit a business generates compared to its size, sales, or assets.