Which of Following Is a Situation in Which You Would

question 47

Multiple Choice

Which of following is a situation in which you would want to use the CAPM approach for estimating the component cost of equity?

• A)When you are able to estimate the market risk premium with certainty.
• B)When you are able to estimate the risk-free rate with certainty.
• C)When you are able to estimate the firm's beta with certainty.
• D)When the firm pays a constant dividend.

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Definitions:

Period Cost

Expenses that are not directly tied to production activities and are expensed in the period in which they occur.

Contribution Margin

The difference between the sales revenue of a product and its variable costs, used to cover fixed costs and contribute to profit.

Variable Costing

An accounting method that only assigns variable costs to inventory, treating fixed costs as expenses in the period they are incurred.

Variable Costing

An accounting practice that only factors in variable production expenses (like direct materials, direct labor, and variable manufacturing overhead) into the cost of goods.