Which of the Following Statements Are Correct

question 37

Multiple Choice

Which of the following statements are correct?
I.The SML approach is dependent upon a reliable measure of a firm's unsystematic risk.
II.The SML approach can be applied to firms that retain all of their earnings.
III.The SML approach assumes a firm's future risks are similar to its past risks.
IV.The SML approach assumes the reward-to-risk ratio is constant.

• A)I and III only
• B)II and IV only
• C)III and IV only
• D)I, II, and III only
• E)II, III, and IV only

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Definitions:

Scrap

Material that is discarded or left over from the manufacturing process, often repurposed or recycled, but sometimes considered waste.

Variable Production Cost

Costs that vary directly with the level of production output, such as materials and labor required for manufacturing.

Fixed Production Cost

Costs associated with the production process that remain unchanged, regardless of the quantity of output.

Variable Selling Expense

Costs that vary directly with the volume of sales, such as commissions and shipping charges.