What Is the Expected Return on This Stock Given the Following

question 45

Multiple Choice

What is the expected return on this stock given the following information?
$\begin{array}{lcc}\text { State of the Economy } & \text { Probability of } & \text { Rate of Return if } \\& \text { State of Economy } & \text { state occurs }\\\text { Boom } & .05 & 16 \% \\\text { Normal } & .45 & 7 \% \\\text { Recession } & .50 & -12 \%\end{array}$

• A)2.05%
• B)1.08%
• C).47%
• D)1.22%
• E)1.43%

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Definitions:

Total Assets

The sum of all assets owned by an individual or organization, including both current and fixed assets.

Liabilities

Economic obligations of the company, such as money owed to lenders, suppliers, and employees.

Days Sales Outstanding (DSO)

A financial measure that indicates the average number of days it takes a company to collect payment after a sale has been made.

Goodwill

An intangible asset that arises when a business is acquired for more than the fair value of its net identifiable assets, often attributed to brand reputation, customer relationships, and intellectual property.