The Following Financial Information Is Available on Rawls Manufacturing Company

question 12

Multiple Choice

The following financial information is available on Rawls Manufacturing Company: $$\begin{array} { l r } \text { Current per share market price } & \$ 48.00 \\\text { Beta } & 1.1 \\\text { Expected rate of return on market } & 12.0 \% \\\text { Risk-free rate } & 6.0 \%\end{array}$$ ? Rawls can issue new common stock to net the company $44 per share. Determine the cost of internal equity capital using the capital asset pricing model approach. (Compute answer to the nearest 0.1%.)

• A) 12.9%
• B) 12.6%
• C) 13.0%
• D) 11.8%

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Definitions:

Materials Quantity Variance

Materials quantity variance is the difference between the actual quantity of materials used in production and the expected quantity, based on standard usage rates.

Materials Price Variance

The difference between the actual cost of materials and the standard cost, used to assess efficiency in purchasing raw materials.

Raw Materials

The basic substances in their natural, modified, or semi-processed states, used as inputs for the production process in manufacturing goods.

FOH Budget Variance

The difference between the actual factory overhead costs incurred and the budgeted overhead costs set at the beginning of a period.