LJP,Inchas the Following Probability Distribution of Holding Period Returns on Its

question 26

Multiple Choice

LJP,Inc.has the following probability distribution of holding period returns on its stock. $$\begin{array} { l c c } \text { State of the Economy } & \text { Probability } & \text { HPR } \\\hline \text { Boom } & .25 & 25 \% \\\text { Normal growth } & .45 & 15 \% \\\text { Recession } & .30 & 9 \%\end{array}$$
The expected return on LJP's stock is

• A) 15.7%.
• B) 12.4%.
• C) 16.5%.
• D) 17.8%.
• E) 11.6%.

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Definitions:

Joint Costs

Costs that are incurred to produce or acquire two or more products at the same time and cannot be readily identified with the individual products.

Real Estate Taxes

Taxes charged by the government on property ownership, typically based on the property's value.

Additional Processing Costs

The costs incurred when further processing is required for a product after its initial manufacturing stage.

Direct Method

A way of preparing the cash flow statement where actual cash flow information from the company's operations is used, directly showing sources and uses of cash.