How Could You Compensate an Investor for Taking on a Significant

question 81

Multiple Choice

How could you compensate an investor for taking on a significant amount of risk?

• A) Increase the expected rate of return
• B) Raise more debt capital
• C) Offer stock at a higher price
• D) Increase sales

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Definitions:

Overhead Cost

Expenses related to the day-to-day running of a business that are not directly linked to a specific product or service but are necessary for the business to operate.

Activity Rates

The specific costs associated with particular business activities, measured to allocate resources or assess performance.

Direct-Labor-Hours

The total hours worked by employees that are directly involved in the manufacturing process.

Predetermined Overhead Rate

A rate used to apply manufacturing overhead costs to products, calculated before the production period begins based on estimated costs and activity levels.