Figure 3-8 The Following Computer Printout Estimated Overhead Costs Using Multiple Regression

question 29

Multiple Choice

Figure 3-8
The following computer printout estimated overhead costs using multiple regression:
During the year the company used 1,000 setup hours and 500 parts.
-Refer to Figure 3-8. The model being measured is

• A) Overhead = 1,000 + 25(Setup hours) + 100(# of parts)
• B) Overhead = 510 + 0.305(Setup hours) + 10.527(# of parts)
• C) Overhead = 0.98 + 40.98(Setup hours) + 4.865(# of parts)
• D) Overhead = 1,000 + 25(Setup hours)

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Definitions:

NPVGO

Net Present Value of Growth Opportunities; a valuation method that calculates the present value of investment opportunities a company is expected to undertake in the future.

Above Average P/E Multiple

A valuation metric indicating that a company's current share price is higher relative to its per-share earnings than the industry or overall market average.

Risk-adjusted Equity Cost

A method of determining the cost of equity capital that incorporates the risk associated with the equity investment.

Price Earnings Ratio

A valuation metric that compares a company's share price to its per-share earnings, used to evaluate if a stock is over or under-valued.