You wish to calculate the risk level of your portfolio based on its beta

You wish to calculate the risk level of your portfolio based on its beta. The five stocks in the portfolio with their respective weights and betas are shown in the accompanying table. Calculate the beta of your portfolio.

Stock portfolio weight Beta
Alpha 20% 1.15
Centauri 10 0.85
Zen 15 1.60
Wren 20 1.35
Yukos 35 1.85


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Gene is a new staff-level auditor on the audit of CalPower, a publicly traded energy and utility company

Problem 16-22 Gene is a new staff-level auditor on the audit of CalPower, a publicly traded energy and utility company. On his first day, his senior informs him that the engagement team is scheduled to have lunch with the internal auditor to discuss ways to improve this year’s audit. While Gene has heard a lot about internal auditing in school and has some friends who recently began working as internal auditors, he is unfamiliar with exactly what internal auditors do and how internal and external auditors can work together to improve the audit process. Gene decides to take a look at last, year’s internal audit report prepared by CalPower’s internal auditors. He notices that the report includes a sentence that reads, “CalPower’s Internal Audit group maintains a high level of independence from management.” Because Gene is intimately familiar with the extensive independence requirements of his own firm, he cannot figure out how CalPower’s internal audit group can possibly assert their own independence.

What is meant by independence from management for internal auditors?


Click here for the solution: Gene is a new staff-level auditor on the audit of CalPower, a publicly traded energy and utility company

Bruno Company accumulates the following data concerning a mixed cost, using miles as the activity level

BE5-4 Bruno Company accumulates the following data concerning a mixed cost, using miles as the activity level

Miles Driven Total Cost Miles Driven Total Cost
January 8,000 $14,150 March 8,500 $15,000
February 7,500 13,500 April 8,200 14,490

Compute the variable and the fixed cost element using the high-low method

Click here for the solution: Bruno Company accumulates the following data concerning a mixed cost, using miles as the activity level

Dimaggio Sports Equipment, Inc. is considering a switch to level production

Dimaggio Sports Equipment, Inc. is considering a switch to level production. Cost efficiencies would occur under level production, and after-tax costs would decline by $35,000, but inventory would increase by $400,000. Dimaggio would have to finance the extra inventory at a cost of 10.5 percent.

a. Should the company go ahead and switch to level production?
b. How low would interest rates need to fall before level production would be feasible?

Click here for the solution: Dimaggio Sports Equipment, Inc. is considering a switch to level production