Answer the Following Questions Using the Information Below

question 150

Multiple Choice

Answer the following questions using the information below:
Harbor Corp currently leases a corporate suite in an office building for a cost of $280,000 a year. Only 80% of the corporate suite is currently being used. A start-up business has proposed a plan that would use the other 20% of the suite and increase the overall costs of maintaining the space by $20,000.
-If the stand-alone method were used,what amount of cost would be allocated to the start-up business?

• A) $70,000
• B) $66,000
• C) $60,000
• D) $74,000

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Definitions:

Equity Beta

A metric that measures the volatility of a stock or portfolio in relation to the overall market; a measure of systemic risk.

Capital Structure

The mix of debt and equity that a company uses to finance its operations and growth.

Unlevered Cost

The cost of an investment that does not include the impact of borrowing; essentially the expense borne without considering the effect of leverage.

Targeted Cost

The desired or estimated cost of a product or project, set in order to achieve competitiveness and profitability objectives.