A Company Has a Beta of 0

question 2

Multiple Choice

A company has a beta of 0.25. If the market return is expected to be 8 percent and the risk-free rate is 2 percent, what is the company's required return?

• A) 1.50 percent
• B) 3.50 percent
• C) 4.00 percent
• D) 13.50 percent

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Definitions:

Standard Variable Overhead Rate

The predetermined rate at which variable overhead costs are expected to occur relative to a specific activity or cost driver.

Variable Manufacturing Overhead

The portion of manufacturing overhead costs that varies with production volume.

Variable Overhead Efficiency Variance

Variable overhead efficiency variance is the difference between the actual and budgeted variable overhead cost based on the efficient utilization of resources.

Direct Labor-hours

The amount of labor hours that can be directly attributed to the production process, serving as a basis for allocating manufacturing overhead costs in some costing systems.