If Investors Have Invested $25,000 of Common Equity in a Company

question 18

Multiple Choice

If investors have invested $25,000 of common equity in a company and it is determined that the required earnings of the company are $2,250 each period,then investors must expect to earn what return?

• A) the risk free rate
• B) 9%
• C) 11%
• D) the market premium

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Definitions:

Custom-Made

Products or services that are specially designed and produced to meet the specific requirements or specifications of a customer.

Prime Cost

The combined costs of direct materials and direct labor incurred to produce a product.

Direct Material

Raw materials that can be directly attributed to the production of specific goods or services, utilized in their creation.

Direct Labour Cost

A cost that can be directly attributed to the production of specific goods or services, such as wages paid to employees who physically produce a product.