Bama Entertainment Has Common Stock with a Beta of 1

question 12

Multiple Choice

Bama Entertainment has common stock with a beta of 1.22.The market risk premium is 8.1 percent and the risk-free rate is 3.9 percent.What is the expected return on this stock?

• A)13.31 percent
• B)12.67 percent
• C)12.40 percent
• D)13.78 percent
• E)14.13 percent

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Definitions:

Accounts Receivable

Represents money owed to a company by its customers for goods or services provided on credit.

Sales

Revenue earned from the exchange of goods or services during a specific period.

Direct Approach

A method used in cash flow statements where cash receipts and payments are reported directly to calculate net cash from operating activities.

Indirect Approach

A method used in cash flow statements where net income is adjusted for non-cash transactions and changes in working capital to calculate operational cash flow.