A Firm Has an Average Investment of $1,000 During the Year

question 56

Multiple Choice

A firm has an average investment of $1,000 during the year. During the same time, the firm generates after-tax earnings of $150.
If the cost of capital is 10 percent, what is the net return on investment?

• A)10 percent
• B)5 percent
• C)12 percent
• D)15 percent

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Definitions:

Backward Elimination

A method in statistical model building where all variables are included at the start and then removed one by one based on some criteria.

F Statistic

A ratio used in ANOVA tests to determine if the variances between means of several groups are significantly different.

SST

Stands for "Sum of Squares Total," a measure in statistics that quantifies the total variation in a dataset.

SSE

Stands for Sum of Squares due to Error, a measure in statistics used to quantify the discrepancy between the data and an estimation model.