The Expected Return on Joseph's Restaurant's Stock Is 14

question 138

Multiple Choice

The expected return on Joseph's Restaurant's stock is 14.25% while the expected return on the market is 12.38%. The stock's beta is 1.18. What is the risk-free rate of return?

• A) 1.99%
• B) 2.04%
• C) 2.48%
• D) 3.23%
• E) 3.68%

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Definitions:

Purchase Discounts

Reductions in the cost price of goods or services that are offered to purchasers when they pay within a specified period or meet certain conditions, aimed at encouraging prompt payment.

Transportation-In

Costs incurred for shipping materials to a company, typically considered part of the inventory cost when calculating the cost of goods sold.

Net Method

An accounting practice where purchase discounts for early payment are anticipated and recorded, reducing the cost of purchased goods.

Perpetual Inventory System

An inventory management approach that keeps continuous, real-time records of goods purchased and sold, reflecting current inventory levels at all times.