A Market-Based Transfer Price Is Based on the ________ When

question 84

Multiple Choice

A market-based transfer price is based on the ________ when determining the transfer price.

• A) variable costs
• B) sales price of goods
• C) cost of the goods
• D) contribution margin

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Definitions:

Systematic Risk Principle

Principle stating that the expected return on a risky asset depends only on that asset’s systematic risk.

Expected Return

The weighted average of all possible returns for an investment, with each return being weighted by its probability of occurrence.

CAPM

The Capital Asset Pricing Model, a theory that describes the relationship between systematic risk and expected return for assets, particularly stocks.

Opportunity Sets

The range of possible investment opportunities available to an investor, given their resources and risk tolerance.