If Investors Have Invested $25,000 of Common Equity in a Company

question 18

Multiple Choice

If investors have invested $25,000 of common equity in a company and it is determined that the required earnings of the company are $2,250 each period,then investors must expect to earn what return?

• A) the risk free rate
• B) 9%
• C) 11%
• D) the market premium

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Definitions:

Minimum Average Total Cost

The lowest point on the average total cost curve, representing the least cost per unit at which a firm can produce any given level of output.

Perfectly Competitive Firm

A firm operating in a market where there are many sellers and buyers, the product is homogeneous, and there are no barriers to entry or exit.

Industry Losses

The total amount by which the expenses and costs of businesses in a certain industry exceed their total revenues.

Economic Profits

The financial outcome derived from removing all explicit and implicit costs from the aggregate revenue.