The Required Rate of Return for a Common Stock Is

question 16

Multiple Choice

The required rate of return for a common stock is defined as the:

• A)expected return given an assumed set of probabilities and expected cash flows on the stock.
• B)maximum expected return based on estimates of expected cashflows from the stock.
• C)minimum expected return necessary to induce an investor to purchase the stock.expected return after evaluation of the risk on the stock has been taken.

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Definitions:

Materials Labor

Generally refers to the workforce involved in the handling, preparation, and processing of materials in manufacturing.

Overhead Costs

Indirect costs required to run a business but cannot be directly attributed to a specific product or service.

Period Costs

Expenses that are not directly tied to the production process and are typically recorded as expenses in the period in which they are incurred.

Inventoriable Costs

Costs that are directly associated with the production of goods and are capitalized as inventory, to be expensed as the goods are sold.