The Common Stock of Chai Tea Inc Has an Expected

question 108

Multiple Choice

The common stock of Chai Tea Inc has an expected return of 14.4%. The return on the market is 10% and the risk-free rate of return is 3.5%. What is the beta of this stock?

• A) .65
• B) 1.09
• C) 1.32
• D) 1.44
• E) 1.68

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Definitions:

Overhead Allocation Base

A measure used to distribute overhead costs among products or services, often based on direct labor hours, machine hours, or direct labor costs.

Manufacturing Overhead

All the indirect costs associated with manufacturing a product, such as utilities, maintenance, and factory equipment depreciation, not directly traceable to a specific product.

Activity Cost Drivers

Refers to factors that influence or contribute to the expenses associated with different business activities.

ABC Costing System

Activity-Based Costing is an accounting method that assigns costs to products or services based on the activities that go into producing them.