Calgary Doughnuts Had Sales of $300 Million in 2007

question 8

Multiple Choice

Calgary Doughnuts had sales of $300 million in 2007. Its cost of sales were $200 million. If sales are expected to grow at 15% in 2008, compute the forecasted costs using the percent of sales method.

• A) $210 million
• B) $215 million
• C) $225 million
• D) $230 million

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Definitions:

Cumulative Abnormal Returns

The aggregate difference in an asset’s observed versus expected returns over a specific timeframe, often used to assess impact of an event.

Takeover Announcement

A public declaration that a company intends to acquire another company, often triggering changes in the stock prices of both companies involved.

Strong-form Efficient

A theory suggesting that all information, public and private, is fully reflected in stock prices, and that it is impossible to consistently achieve higher returns.

Semistrong-form Efficient

Refers to a market efficiency form where prices include all publicly available information, including both historical and newly released financial data.