Your Estimate of the Market Risk Premium Is 6

question 51

Multiple Choice

Your estimate of the market risk premium is 6%.The risk-free rate of return is 4.5% and General Motors has a beta of 1.6.What is General Motors' cost of equity capital?

• A)14.1%
• B)13.5%
• C)13.9%
• D)14.4%

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Definitions:

Variable Overhead

Costs of indirect production activities that fluctuate with the level of production output, such as electricity for machinery or materials handling costs.

Direct Materials

Direct materials are raw materials that are directly used in the manufacturing process of a product and can be easily traced to the product itself.

Direct Labor-Hours

A measure of the total amount of time worked by employees directly involved in manufacturing a product or delivering a service.

Variable Overhead

Costs of production that vary with the level of output, such as utility expenses or raw material costs.