Calculate the Expected Return for E Services, Which Has a Beta

question 16

Multiple Choice

Calculate the expected return for E Services, which has a beta of 1.5 when the risk-free rate is 0.05 and you expect the market return to be 0.11.

• A) 10.6 percent
• B) 12.1 percent
• C) 13.6 percent
• D) 14.0 percent
• E) 16.2 percent

---

Definitions:

Predetermined Overhead Rate

A rate based on the relationship between estimated annual overhead costs and expected annual operating activity, expressed in terms of a common activity base.

Direct Labor Hours

The total hours worked by employees directly involved in the production of goods or services, used for cost allocation and operational planning.

Standard

A level of quality or achievement, especially one that is used as a point of reference.

Budget

An estimation of revenue and expenses over a specified future period of time, used by organizations for planning and controlling their financial resources.