Ch11
28 Pages

Ch11

Course Number: FIN 600, Spring 2010

College/University: Odessa

Word Count: 8864

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COURSES > FUNDAMENTALS OF CORPORATE FINANCE:, 9/E- ROSS > CONTROL PANEL > POOL MANAGER > POOL CANVAS Pool Canvas Add, modify, and remove questions. Select a question type from the Add Question drop-down list and click Go to add questions. Use Creation Settings to establish which default options, such as feedback and images, are available for question creation. Add Multiple Choice Creation Settings...

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> COURSES FUNDAMENTALS OF CORPORATE FINANCE:, 9/E- ROSS > CONTROL PANEL > POOL MANAGER > POOL CANVAS Pool Canvas Add, modify, and remove questions. Select a question type from the Add Question drop-down list and click Go to add questions. Use Creation Settings to establish which default options, such as feedback and images, are available for question creation. Add Multiple Choice Creation Settings Name Chapter 11 Project Analysis and Evaluation Description Questions which Blackboard's assessment component is incapable of supporting are not included in the export. Instructions Add Question Here Question 1 Multiple Choice Question Forecasting risk is defined as the possibility that: Answer some proposed projects will be rejected. some proposed projects will be temporarily delayed. incorrect decisions will be made due to erroneous cash flow projections. some projects will be mutually exclusive. tax rates could change over the life of a project. Correct Feedback Refer to section 11.1 Incorrect Feedback Refer to section 11.1 Add Question Here Question 2 Multiple Choice Question Scenario analysis is defined as the: Answer determination of the initial cash outlay required to implement a project. determination of changes in NPV estimates when what-if questions are posed. isolation of the effect that a single variable has on the NPV of a project. separation of a project's sunk costs from its opportunity costs. analysis of the effects that a project's terminal cash flows has on the project's NPV. Correct Feedback Refer to section 11.2 Incorrect Feedback Refer to section 11.2 Add Question Here Question 3 Multiple Choice Question An analysis of the change in a project's NPV when a single variable is changed is called _____ analysis. Answer forecasting scenario sensitivity simulation break-even Correct Feedback Incorrect Feedback Refer to section 11.2 Refer to section 11.2 Add Question Here Question 4 Multiple Choice Question An analysis which combines scenario analysis with sensitivity analysis is called _____ analysis. Answer forecasting combined complex simulation break-even Correct Feedback Refer to section 11.2 Incorrect Feedback Refer to section 11.2 Add Question Here Question 5 Multiple Choice Question Variable costs can be defined as the costs that: Answer remain constant for all time periods. remain constant over the short run. vary directly with sales. are classified as non-cash expenses. are inversely related to the number of units sold. Correct Feedback Refer to section 11.3 Incorrect Feedback Refer to section 11.3 Add Question Here Question 6 Multiple Choice Question Fixed costs: Answer change as a small quantity of output produced changes. are constant over the short-run regardless of the quantity of output produced. are defined as the change in total costs when one more unit of output is produced. are subtracted from sales to compute the contribution margin. can be ignored in scenario analysis since they are constant over the life of a project. Correct Feedback Refer to section 11.3 Incorrect Feedback Refer to section 11.3 Add Question Here Question 7 Multiple Choice Question The change in revenue that occurs when one more unit of output is sold is referred to as: Answer marginal revenue. average revenue. total revenue. erosion. scenario revenue. Correct Feedback Incorrect Feedback Refer to section 11.3 Refer to section 11.3 Add Question Here Question 8 Multiple Choice Question The change in variable costs that occurs when production is increased by one unit is referred to as the: Answer marginal cost. average cost. total cost. scenario cost. net cost. Correct Feedback Incorrect Feedback Refer to section 11.3 Refer to section 11.3 Add Question Here Question 9 Multiple Choice Question By definition, which one of the following must equal zero at the accounting break-even point? Answer net present value internal rate of return contribution margin net income operating cash flow Correct Feedback Incorrect Feedback Refer to section 11.3 Refer to section 11.3 Add Question Here Question 10 Multiple Choice Question By definition, which one of the following must equal zero at the cash break-even point? Answer net present value internal rate of return contribution margin net income operating cash flow Correct Feedback Incorrect Feedback Refer to section 11.4 Refer to section 11.4 Add Question Here Question 11 Multiple Choice Question Which one of the following is defined as the sales level that corresponds to a zero NPV? Answer accounting break-even leveraged break-even marginal break-even cash break-even financial break-even Correct Feedback Incorrect Feedback Refer to section 11.4 Refer to section 11.4 Add Question Here Question 12 Multiple Choice Question Operating leverage is the degree of dependence a firm places on its: Answer variable costs. fixed costs. sales. operating cash flows. net working capital. Correct Feedback Incorrect Feedback Refer to section 11.5 Refer to section 11.5 Add Question Here Question 13 Multiple Choice Question Which one of the following is the relationship between the percentage change in operating cash flow and the percentage change in quantity sold? Answer degree of sensitivity degree of operating leverage accounting break-even cash break-even contribution margin Correct Feedback Incorrect Feedback Refer to section 11.5 Refer to section 11.5 Add Question Here Question 14 Multiple Choice Question Bell Weather Goods has several proposed independent projects that have positive NPVs. However, the firm cannot initiate any of the projects due to a lack of financing. This situation is referred to as: Answer financial rejection. project rejection. soft rationing. marginal rationing. capital rationing. Correct Feedback Incorrect Feedback Refer to section 11.6 Refer to section 11.6 Add Question Here Question 15 Multiple Choice Question The procedure of allocating a fixed amount of funds for capital spending to each business unit is called: Answer marginal spending. capital preservation. soft rationing. hard rationing. marginal rationing. Correct Feedback Incorrect Feedback Refer to section 11.6 Refer to section 11.6 Add Question Here Question 16 Multiple Choice Question PC Enterprises wants to commence a new project but is unable to obtain the financing under any circumstances. This firm is facing: Answer financial deferral. financial allocation. capital allocation. marginal rationing. hard rationing. Correct Feedback Incorrect Feedback Refer to section 11.6 Refer to section 11.6 Add Question Here Question 17 Multiple Choice Question Forecasting risk emphasizes the point that the correctness of any decision to accept or reject a project is highly dependent upon the: Answer method of analysis used to make the decision. initial cash outflow. ability to recoup any investment in net working capital. accuracy of the projected cash flows. length of the project. Correct Feedback Incorrect Feedback Refer to section 11.1 Refer to section 11.1 Add Question Here Question 18 Multiple Choice Question Steve is fairly cautious when analyzing a new project and thus he projects the most optimistic, the most realistic, and the most pessimistic outcome that can reasonably be expected. Which type of analysis is Steve using? Answer simulation testing sensitivity analysis break-even analysis rationing analysis scenario analysis Correct Feedback Incorrect Feedback Refer to section 11.2 Refer to section 11.2 Add Question Here Question 19 Multiple Choice Question Scenario analysis is best suited to accomplishing which one of the following when analyzing a project? Answer determining how fixed costs affect NPV estimating the residual value of fixed assets identifying the potential range of reasonable outcomes determining the minimal level of sales required to break-even on an accounting basis determining the minimal level of sales required to break-even on a financial basis Correct Feedback Refer to section 11.2 Incorrect Feedback Refer to section 11.2 Add Question Here Question 20 Multiple Choice Question Which one of the following will be used in the computation of the best-case analysis of a proposed project? Answer minimal number of units that are expected to be produced and sold the lowest expected salvage value that can be obtained for a project's fixed assets the most anticipated sales price per unit the lowest variable cost per unit that can reasonably be expected the highest level of fixed costs that is actually anticipated Correct Feedback Incorrect Feedback Refer to section 11.2 Refer to section 11.2 Add Question Here Question 21 Multiple Choice Question The base case values used in scenario analysis are the ones considered the most: Answer optimistic. desired by management. pessimistic. conducive to creating a positive net present value. likely to occur. Correct Feedback Incorrect Feedback Refer to section 11.2 Refer to section 11.2 Add Question Here Question 22 Multiple Choice Question Which of the following variables will be at their highest expected level under a worst case scenario? I. fixed cost II. sales price III. variable cost IV. sales quantity Answer I only III only II and III only I and III only I, III, and IV only Correct Feedback Incorrect Feedback Refer to section 11.2 Refer to section 11.2 Add Question Here Question 23 Multiple Choice Question When you assign the lowest anticipated sales price and the highest anticipated costs to a project, you are analyzing the project under the condition known as: Answer best case sensitivity analysis. worst case sensitivity analysis. best case scenario analysis. worst case scenario analysis. base case scenario analysis. Correct Feedback Refer to section 11.2 Incorrect Feedback Refer to section 11.2 Add Question Here Question 24 Multiple Choice Question Which one of the following statements concerning scenario analysis is correct? Answer The pessimistic case scenario determines the maximum loss, in current dollars, that a firm could possibly incur from a given project. Scenario analysis defines the entire range of results that could be realized from a proposed investment project. Scenario analysis determines which variable has the greatest impact on a project's final outcome. Scenario analysis helps managers analyze various outcomes that are possible given reasonable ranges for each of the assumptions. Management is guaranteed a positive outcome for a project when the worst case scenario produces a positive NPV. Correct Feedback Incorrect Feedback Refer to section 11.2 Refer to section 11.2 Add Question Here Question 25 Multiple Choice Question Sensitivity analysis determines the: Answer range of possible outcomes given that most variables are reliable only within a stated range. degree to which the net present value reacts to changes in a single variable. net present value range that can be realized from a proposed project. degree to which a project relies on its fixed costs. ideal ratio of variable costs to fixed costs for profit maximization. Correct Feedback Refer to section 11.2 Incorrect Refer to section 11.2 Feedback Add Question Here Question 26 Multiple Choice Question Assume you graph a project's net present value given various sales quantities. Which one of the following is correct regarding the resulting function? Answer The steepness of the function relates to the project's degree of operating leverage. The steeper the function, the less sensitive the project is to changes in the sales quantity. The resulting function will be a hyperbole. The resulting function will include only positive values. The slope of the function measures the sensitivity of the net present value to a change in sales quantity. Correct Feedback Incorrect Feedback Refer to section 11.2 Refer to section 11.2 Add Question Here Question 27 Multiple Choice Question As the degree of sensitivity of a project to a single variable rises, the: Answer less important the variable to the final outcome of the project. less volatile the project's net present value to that variable. greater the importance of accurately predicting the value of that variable. greater the sensitivity of the project to the other variable inputs. less volatile the project's outcome. Correct Feedback Refer to section 11.2 Incorrect Feedback Refer to section 11.2 Add Question Here Question 28 Multiple Choice Question Sensitivity analysis is based on: Answer varying a single variable and measuring the resulting change in the NPV of a project. applying differing discount rates to a project's cash flows and measuring the effect on the NPV. expanding and contracting the number of years for a project to determine the optimal project length. the best, worst, and most expected situations. various states of the economy and the probability of each state occurring. Correct Feedback Refer to section 11.2 Incorrect Refer to section 11.2 Feedback Add Question Here Question 29 Multiple Choice Question Which type of analysis identifies the variable, or variables, that are most critical to the success of a particular project? Answer leverage risk break-even sensitivity cash flow Correct Feedback Incorrect Feedback Refer to section 11.2 Refer to section 11.2 Add Question Here Question 30 Multiple Choice Question Simulation analysis is based on assigning a _____ and analyzing the results. Answer narrow range of values to a single variable narrow range of values to multiple variables simultaneously wide range of values to a single variable wide range of values to multiple variables simultaneously single value to each of the variables Correct Feedback Refer to section 11.2 Incorrect Feedback Refer to section 11.2 Add Question Here Question 31 Multiple Choice Question Which one of the following types of analysis is the most complex to conduct? Answer scenario break-even sensitivity degree of operating leverage simulation Correct Feedback Incorrect Feedback Refer to section 11.2 Refer to section 11.2 Add Question Here Question 32 Multiple Choice Question Ted is analyzing a project using simulation. His focus is limited to the short-term. To ease the simulation process, he is combining expenses into various categories. Which one of the following should he include in the fixed cost category? Answer production department payroll taxes equipment insurance sales tax raw materials product shipping costs Correct Feedback Incorrect Feedback Refer to section 11.2 Refer to section 11.2 Add Question Here Question 33 Multiple Choice Question Which one of the following statements concerning variable costs is correct? Answer Variable costs minus fixed costs equal marginal costs. Variable costs are equal to fixed costs when production is equal to zero. An increase in variable costs increases the operating cash flow. Variable costs are inversely related to fixed costs. Variable costs per unit are inversely related to the contribution margin per unit. Correct Feedback Refer to section 11.3 Incorrect Feedback Refer to section 11.3 Add Question Here Question 34 Multiple Choice Question Which of the following are inversely related to variable costs per unit? I. contribution margin per unit II. number of units sold III. operating cash flow per unit IV. net profit per unit Answer I and II only III and IV only II, III, and IV only I, III, and IV only I, II, III, and IV Correct Feedback Incorrect Feedback Refer to section 11.3 Refer to section 11.3 Add Question Here Question 35 Multiple Choice Question Steve, the sales manager for TL Products, wants to sponsor a one-week "Customer Appreciation Sale" where the firm offers to sell additional units of a product at the lowest price possible without negatively affecting the firm's profits. Which one of the following represents the price that should be charged for the additional units during this sale? Answer average variable cost average total cost average total revenue marginal revenue marginal cost Correct Feedback Incorrect Feedback Refer to section 11.3 Refer to section 11.3 Add Question Here Question 36 Multiple Choice Question The president of Global Wholesalers would like to offer special sale prices to the firm's best customers under the following terms: 1. The prices will apply only to units purchased in excess of the quantity normally purchased by a customer. 2. The units purchased must be paid for in cash at the time of sale. 3. The total quantity sold under these terms cannot exceed the excess capacity of the firm. 4. The net profit of the firm should not be affected. 5. The prices will be in effect for one week only. Given these conditions, the special sale price should be set equal to the: Answer average variable cost of materials only. average cost of all variable inputs. sensitivity value of the variable costs. marginal cost of materials only. marginal cost of all variable inputs. Correct Feedback Incorrect Feedback Refer to section 11.3 Refer to section 11.3 Add Question Here Question 37 Multiple Choice Question The contribution margin per unit is equal to the: Answer sales price per unit minus the total costs per unit. variable cost per unit minus the fixed cost per unit. sales price per unit minus the variable cost per unit. pre-tax profit per unit. aftertax profit per unit. Correct Feedback Refer to section 11.3 Incorrect Feedback Refer to section 11.3 Add Question Here Question 38 Multiple Choice Question Which of the following values will be equal to zero when a firm is producing the accounting break-even level of output? I. operating cash flow II. internal rate of return III. net income IV. payback period Answer I only III only II and III only I and IV only I, II, and III only Correct Feedback Incorrect Feedback Refer to section 11.3 Refer to section 11.3 Add Question Here Question 39 Multiple Choice Question An increase in which of the following will increase the accounting break-even quantity? Assume straightline depreciation is used. I. annual salary for the firm's president II. contribution margin per unit III. cost of equipment required by a project IV. variable cost per unit Answer I and III only I and IV only II and III only I, III, and IV only I, II, and IV only Correct Feedback Incorrect Feedback Refer to section 11.3 Refer to section 11.3 Add Question Here Question 40 Multiple Choice Question Webster Iron Works started a new project last year. As it turns out, the project has been operating at its accounting break-even level of output and is now expected to continue at that level over its lifetime. Given this, you know that the project: Answer will never pay back. has a zero net present value. is operating at a higher level than if it were operating at its cash break-even level. is operating at a higher level than if it were operating at its financial break-even level. is lowering the total net income of the firm. Correct Feedback Incorrect Feedback Refer to section 11.3 Refer to section 11.3 Add Question Here Question 41 Multiple Choice Question Given the following, which feature identifies the most desirable level of output for a project? Answer operating cash flow equal to the depreciation expense payback period equal to the project's life discounted payback period equal to the project's life zero IRR zero operating cash flow Correct Feedback Incorrect Feedback Refer to sections 11.3 and 11.4 Refer to sections 11.3 and 11.4 Add Question Here Question 42 Multiple Choice Question At the accounting break-even point, the: Answer payback period must equal the required payback period. NPV is zero. IRR is zero. contribution margin per unit equals the fixed costs per unit. contribution margin per unit is zero. Correct Feedback Refer to section 11.3 Incorrect Feedback Refer to section 11.3 Add Question Here Question 43 Multiple Choice Question A project has a payback period that exactly equals the project's life. The project is operating at: Answer its maximum capacity. the financial break-even point. the cash break-even point. the accounting break-even point. a zero level of output. Correct Feedback Incorrect Feedback Refer to section 11.3 Refer to section 11.3 Add Question Here Question 44 Multiple Choice Question Valerie just completed analyzing a project. Her analysis indicates that the project will have a 6-year life and require an initial cash outlay of $320,000. Annual sales are estimated at $589,000 and the tax rate is 34 percent. The net present value is a negative $320,000. Based on this analysis, the project is expected to operate at the: Answer maximum possible level of production. minimum possible level of production. financial break-even point. accounting break-even point. cash break-even point. Correct Feedback Incorrect Feedback Refer to section 11.4 Refer to section 11.4 Add Question Here Question 45 Multiple Choice Question A project has a projected IRR of negative 100 percent. Which one of the following statements must also be true concerning this project? Answer The discounted payback period equals the life of the project. The operating cash flow is positive and equal to the depreciation. The net present value of the project is negative and equal to the initial investment. The payback period is exactly equal to the life of the project. The net present value of the project is equal to zero. Correct Feedback Incorrect Feedback Refer to section 11.4 Refer to section 11.4 Add Question Here Question 46 Multiple Choice Question Which of the following characteristics relate to the cash break-even point for a given project? I. The project never pays back. II. The IRR equals the required rate of return. III. The NPV is negative and equal to the initial cash outlay. IV. The operating cash flow is equal to the depreciation expense. Answer I and III only II and IV only I, II, and III only II, III, and IV only I, II, III, and IV Correct Feedback Incorrect Feedback Refer to section 11.4 Refer to section 11.4 Add Question Here Question 47 Multiple Choice Question When the operating cash flow of a project is equal to zero, the project is operating at the: Answer maximum possible level of production. minimum possible level of production. financial break-even point. accounting break-even point. cash break-even point. Correct Feedback Incorrect Feedback Refer to section 11.4 Refer to section 11.4 Add Question Here Question 48 Multiple Choice Question Which one of the following represents the level of output where a project produces a rate of return just equal to its requirement? Answer capital break-even cash break-even accounting break-even financial break-even internal break-even Correct Feedback Incorrect Feedback Refer to section 11.4 Refer to section 11.4 Add Question Here Question 49 Multiple Choice Question Which of the following statements are identified with financial break-even point? I. The present value of the cash inflows exactly offsets the initial cash outflow. II. The payback period is equal to the life of the project. III. The NPV is zero. IV. The discounted payback period equals the life of the project. Answer I and II only I and III only II and IV only I, II, and III only I, III, and IV only Correct Feedback Incorrect Feedback Refer to section 11.4 Refer to section 11.4 Add Question Here Question 50 Multiple Choice Question You would like to know the minimum level of sales that is needed for a project to be accepted based on its net present value. To determine that sales level you should compute the: Answer contribution margin per unit and set that margin equal to the fixed costs per unit. contribution margin per unit. accounting break-even point. cash break-even point. financial break-even point. Correct Feedback Incorrect Feedback Refer to section 11.4 Refer to section 11.4 Add Question Here Question 51 Multiple Choice Question Theresa is analyzing a project that currently has a projected NPV of zero. Which of the following changes that she is considering will help that project produce a positive NPV instead? Consider each change independently. I. increase the quantity sold II. decrease the fixed leasing cost for equipment III. decrease the labor hours needed to produce one unit IV. increase the sales price Answer I and II only I and IV only II, III, and IV only I, II, and IV only I, II, III, and IV Correct Feedback Incorrect Feedback Refer to section 11.4 Refer to section 11.4 Add Question Here Question 52 Multiple Choice Question You are considering a project that you believe is quite risky. To reduce any potentially harmful results from accepting this project, you could: Answer lower the degree of operating leverage. lower the contribution margin per unit. increase the initial cash outlay. increase the fixed costs per unit while lowering the contribution margin per unit. lower the operating cash flow of the project. Correct Feedback Incorrect Feedback Refer to section 11.5 Refer to section 11.5 Add Question Here Question 53 Multiple Choice Question Which one of the following characteristics best describes a project that has a low degree of operating leverage? Answer high variable costs relative to the fixed costs relatively high initial cash outlay an OCF that is highly sensitive to the sales quantity high level of forecasting risk a high depreciation expense Correct Feedback Incorrect Feedback Refer to section 11.5 Refer to section 11.5 Add Question Here Question 54 Multiple Choice Question Which one of the following will best reduce the risk of a project by lowering the degree of operating leverage? Answer hiring temporary workers from an employment agency rather than hiring part-time production employees subcontracting portions of the project rather than purchasing new equipment to do all the work in-house leasing equipment on a long-term basis rather than buying equipment lowering the projected selling price per unit changing the proposed labor-intensive production method to a more capital intensive method Correct Feedback Refer to section 11.5 Incorrect Refer to section 11.5 Feedback Add Question Here Question 55 Multiple Choice Question The degree of operating leverage is equal to: Answer the percentage change in quantity divided by the percentage change in OCF. the percentage change in sales divided by the percentage change in OCF. 1 + FC/OCF. 1 + VC/OCF. 1 - (FC + VC)/OCF. Correct Feedback Refer to section 11.5 Incorrect Feedback Refer to section 11.5 Add Question Here Question 56 Multiple Choice Question Uptown Promotions has three divisions. As part of the planning process, the CFO requested that each division submit its capital budgeting proposals for next year. These proposals represent positive net present value projects that fall within the long-range plans of the firm. The requests from the divisions are $4.2 million, $3.1 million, and $6.8 million, respectively. For the firm as a whole, Uptown Promotions is limited to spending $10 million for new projects next year. This is an example of: Answer scenario analysis. sensitivity analysis. determining operating leverage. soft rationing. hard rationing. Correct Feedback Incorrect Feedback Refer to section 11.6 Refer to section 11.6 Add Question Here Question 57 Multiple Choice Question Brubaker & Goss has received requests for capital investment funds for next year from each of its five divisions. All requests represent positive net present value projects. All projects are independent. Senior management has decided to allocate the available funds based on the profitability index of each project since the company has insufficient funds to fulfill all of the requests. Management is following a practice known as: Answer scenario analysis. sensitivity analysis. leveraging. hard rationing. soft rationing. Correct Feedback Incorrect Feedback Refer to section 11.6 Refer to section 11.6 Add Question Here Question 58 Multiple Choice Question The CFO of Edward's Food Distributors is continually receiving capital funding requests from its division managers. These requests are seeking funding for positive net present value projects. The CFO continues to deny all funding requests due to the financial situation of the company. Apparently, the company is: Answer operating at the accounting break-even point. operating at the financial break-even point. facing hard rationing. operating with zero leverage. operating at maximum capacity. Correct Feedback Incorrect Feedback Refer to section 11.6 Refer to section 11.6 Add Question Here Question 59 Multiple Choice Question Precise Machinery is analyzing a proposed project. The company expects to sell 2,100 units, give or take 5 percent. The expected variable cost per unit is $260 and the expected fixed costs are $589,000. Cost estimates are considered accurate within a plus or minus 4 percent range. The depreciation expense is $129,000. The sales price is estimated at $750 per unit, plus or minus 2 percent. What is the sales revenue under the worst case scenario? Answer $1,686,825 $1,496,250 $1,466,325 $1,543,500 $1,620,675 Correct Feedback Incorrect Feedback Sales Worst case = (2,100 0.95) ($750 .98) = $1,466,325 Sales Worst case = (2,100 0.95) ($750 .98) = $1,466,325 Add Question Here Question 60 Multiple Choice Question Precise Machinery is analyzing a proposed project. The company expects to sell 2,100 units, give or take 5 percent. The expected variable cost per unit is $260 and the expected fixed costs are $589,000. Cost estimates are considered accurate within a plus or minus 4 percent range. The depreciation expense is $129,000. The sales price is estimated at $750 per unit, give or take 2 percent. What is the contribution margin per unit under the best case scenario? Answer $209.52 $494.60 $469.52 $490.00 $515.40 Correct Feedback Incorrect Feedback Contribution marginbest case = ($750 1.02) - ($260 0.96) = $515.40 Contribution marginbest case = ($750 1.02) - ($260 0.96) = $515.40 Add Question Here Question 61 Multiple Choice Question Precise Machinery is analyzing a proposed project. The company expects to sell 2,100 units, give or take 5 percent. The expected variable cost per unit is $260 and the expected fixed costs are $589,000. Cost estimates are considered accurate within a plus or minus 4 percent range. The depreciation expense is $129,000. The sales price is estimated at $750 per unit, give or take 2 percent. What is the amount of the total costs per unit under the worst case scenario? Answer $548.58 $577.45 $604.16 $638.23 $640.25 Correct Feedback Incorrect Feedback Total costs per unitworst case = [($2,100 0.95) (260 1.04) + ($589,000 1.04)]/(2,100 0.95) = $577.45 Total costs per unitworst case = [($2,100 0.95) (260 1.04) + ($589,000 1.04)]/(2,100 0.95) = $577.45 Add Question Here Question 62 Multiple Choice Question Precise Machinery is analyzing a proposed project. The company expects to sell 2,100 units, give or take 5 percent. The expected variable cost per unit is $260 and the expected fixed costs are $589,000. Cost estimates are considered accurate within a plus or minus 4 percent range. The depreciation expense is $129,000. The sales price is estimated at $750 per unit, give or take 2 percent. The tax rate is 35 percent. The company is conducting a sensitivity analysis on the sales price using a sales price estimate of $755. What is the operating cash flow based on this analysis? Answer $337,975 $293,089 $86,675 $354,874 $368,015 Correct Feedback Incorrect Feedback OCF {[(755 $260) 2,100] $589,000} {1 - 0.35} + ($129,000 0.35) = $337,975 OCF {[(755 $260) 2,100] $589,000} {1 - 0.35} + ($129,000 0.35) = $337,975 Add Question Here Question 63 Multiple Choice Question Precise Machinery is analyzing a proposed project. The company expects to sell 2,100 units, give or take 5 percent. The expected variable cost per unit is $260 and the expected fixed costs are $589,000. Cost estimates are considered accurate within a plus or minus 4 percent range. The depreciation expense is $129,000. The sales price is estimated at $750 per unit, give or take 2 percent. The tax rate is 35 percent. The company is conducting a sensitivity analysis with fixed costs of $590,000. What is the OCF given this analysis? Answer $337,975 $330,500 $285,350 $354,874 $414,350 Correct Feedback Incorrect Feedback OCF {[(750 $260) 2,100] $590,000} {1 - 0.35} + ($129,000 0.35) = $330,500 OCF {[(750 $260) 2,100] $590,000} {1 - 0.35} + ($129,000 0.35) = $330,500 Add Question Here Question 64 Multiple Choice Question Miller Mfg. is analyzing a proposed project. The company expects to sell 8,000 units, plus or minus 2 percent. The expected variable cost per unit is $11 and the expected fixed costs are $287,000. The fixed and variable cost estimates are considered accurate within a plus or minus 5 percent range. The depreciation expense is $68,000. The tax rate is 32 percent. The sales price is estimated at $64 a unit, plus or minus 3 percent. What is the earnings before interest and taxes under the base case scenario? Answer $46,920 $93,160 $114,920 $69,000 $58,480 Correct Feedback Incorrect Feedback EBIT for base case = [8,000 ($64 $11)] $287,000 $68,000 = $69,000 EBIT for base case = [8,000 ($64 $11)] $287,000 $68,000 = $69,000 Add Question Here Question 65 Multiple Choice Question Miller Mfg. is analyzing a proposed project. The company expects to sell 8,000 units, plus or minus 2 percent. The expected variable cost per unit is $11 and the expected fixed costs are $287,000. The fixed and variable cost estimates are considered accurate within a plus or minus 5 percent range. The depreciation expense is $68,000. The tax rate is 32 percent. The sales price is estimated at $64 a unit, give or take 3 percent. What is the operating cash flow under the best case scenario? Answer $144,150 $148,475 $107,146 $168,630 $174,220 Correct Feedback Incorrect Feedback OCFbest case = {{[($64 1.03) - ($11 0.95)] (8,000 1.02)} - ($287,000 0.95)} {1 0.32} + ($68,000 0.32) = $144,150 OCFbest case = {{[($64 1.03) - ($11 0.95)] (8,000 1.02)} - ($287,000 0.95)} {1 0.32} + ($68,000 0.32) = $144,150 Add Question Here Question 66 Multiple Choice Question Miller Mfg. is analyzing a proposed project. The company expects to sell 8,000 units, plus or minus 2 percent. The expected variable cost per unit is $11 and the expected fixed costs are $287,000. The fixed and variable cost estimates are considered accurate within a plus or minus 5 percent range. The depreciation expense is $68,000. The tax rate is 32 percent. The sales price is estimated at $64 a unit, give or take 3 percent. What is the net income under the worst case scenario? Answer $8,578 $18,228 $15,846 $20,704 $24,696 Correct Feedback Incorrect Feedback Net incomeworst = {{[($64 0.97) - ($11 1.05)] (8,000 0.98)} - ($287,000 1.05) $68,000} {1 - 0.32} = $18,228 Net incomeworst = {{[($64 0.97) - ($11 1.05)] (8,000 0.98)} - ($287,000 1.05) $68,000} {1 - 0.32} = $18,228 Add Question Here Question 67 Multiple Choice Question Stellar Plastics is analyzing a proposed project. The company expects to sell 12,000 units, plus or minus 3 percent. The expected variable cost per unit is $3.20 and the expected fixed costs are $30,000. The fixed and variable cost estimates are considered accurate within a plus or minus 5 percent range. The depreciation expense is $26,000. The tax rate is 34 percent. The sales price is estimated at $7.50 a unit, plus or minus 4 percent. What is the operating cash flow for a sensitivity analysis using total fixed costs of $31,000? Answer $19,580 $22,436 $27,210 $31,460 $37,540 Correct Feedback Incorrect Feedback OCF = [(12,000 ($7.50 $3.20)] $31,000][1- 0.34] +($26,000 0.34) = $22,436 OCF = [(12,000 ($7.50 $3.20)] $31,000][1- 0.34] +($26,000 0.34) = $22,436 Add Question Here Question 68 Multiple Choice Question Sunset United is analyzing a proposed project. The company expects to sell 15,000 units, plus or minus 4 percent. The expected variable cost per unit is $120 and the expected fixed costs are $311,000. The fixed and variable cost estimates are considered accurate within a plus or minus 3 percent range. The depreciation expense is $74,000. The tax rate is 35 percent. The sales price is estimated at $170 a unit, plus or minus 2 percent. What is the contribution margin per unit for a sensitivity analysis using a variable cost per unit of $125? Answer $30 $45 $50 $24 $27 Correct Feedback Incorrect Feedback Contribution margin = $170 $125 = $45 Contribution margin = $170 $125 = $45 Add Question Here Question 69 Multiple Choice Question Your company is reviewing a project with estimated labor costs of $21.20 per unit, estimated raw material costs of $37.18 a unit, and estimated fixed costs of $20,000 a month. Sales are projected at 42,000 units over the one-year life of the project. All estimates are accurate within a range of plus or minus 5 percent. What are the total variable costs for the worst-case scenario? Answer $890,400 $1,561,560 $2,445,830 $2,451,960 $2,691,960 Correct Feedback Incorrect Feedback Total variable costs = [($21.20 + $37.18) 1.05][42,000 0.95] = $2,445,830 Total variable costs = [($21.20 + $37.18) 1.05][42,000 0.95] = $2,445,830 Add Question Here Question 70 Multiple Choice Question A project has earnings before interest and taxes of $14,600, fixed costs of $52,000, a selling price of $29 a unit, and a sales quantity of 16,000 units. All estimates are accurate within a plus/minus range of 3 percent. Depreciation is $12,000. What is the base case variable cost per unit? Answer $22.16 $23.84 $24.09 $24.23 $25.18 Correct Feedback Incorrect Feedback [16,000 ($29 - v)] $52,000 $12,000 = $14,600; v = $24.09 [16,000 ($29 - v)] $52,000 $12,000 = $14,600; v = $24.09 Add Question Here Question 71 Multiple Choice Question At a production level of 4,500 units, a project has total costs of $108,000. The variable cost per unit is $11.20. Assume the firm can increase production by 1,000 units without increasing its fixed costs. What will the total costs be if 4,800 units are produced? Answer $102,780 $104,640 $106,400 $108,000 $111,360 Correct Feedback Incorrect Feedback Total cost = [$108,000 - ($11.20 4,500)] + (4,800 $11.20) = $111,360 Total cost = [$108,000 - ($11.20 4,500)] + (4,800 $11.20) = $111,360 Add Question Here Question 72 Multiple Choice Question A company is considering a project with a cash break-even point of 22,600 units. The selling price is $28 a unit, the variable cost per unit is $13, and depreciation is $14,000. What is the projected amount of fixed costs? Answer $325,000 $339,000 $342,000 $348,000 $353,000 Correct Feedback Incorrect Feedback FCcash break-even = 22,600 ($28 $13) = $339,000 FCcash break-even = 22,600 ($28 $13) = $339,000 Add Question Here Question 73 Multiple Choice Question At the accounting break-even point, Swiss Mountain Gear sells 14,600 ski masks at a price of $10 each. At this level of production, the depreciation is $58,000 and the variable cost per unit is $4. What is the amount of the fixed costs at this production level? Answer $29,600 $52,400 $61,300 $87,600 $145,600 Correct Feedback Incorrect Feedback Fixed costsaccounting break-even = [14,600 ($10 - $4)] - $58,000 = $29,600 Fixed costsaccounting break-even = [14,600 ($10 - $4)] - $58,000 = $29,600 Add Question Here Question 74 Multiple Choice Question The Coffee Express has computed its fixed costs to be $0.34 for every cup of coffee it sells given annual sales of 212,000 cups. The sales price is $1.49 per cup while the variable cost per cup is $0.63. How many cups of coffee must it sell to break-even on a cash basis? Answer 83,814 96,470 123,910 167,630 212,000 Correct Feedback Incorrect Feedback Qcash break-even = ($0.34 212,000)/($1.49 - $0.63) = 83,814 cups Qcash break-even = ($0.34 212,000)/($1.49 - $0.63) = 83,814 cups Add Question Here Question 75 Multiple Choice Question The Metal Shop produces 1.8 million metal fasteners a year for industrial use. At this level of production, its total fixed costs are $378,000 and its total costs are $522,000. The firm can increase its production by 5 percent, without increasing either its total fixed costs or its variable costs per unit. A customer has made a one-time offer for an additional 50,000 units at a price per unit of $0.10. Should the firm sell the additional units at the offered price? Why or why not? Answer yes; The offered price is less than the marginal cost. yes; The offered price is equal to the marginal cost. yes; The offered price is greater than the marginal cost. no; The offered price is less than the marginal cost. no; The offered price is greater than the marginal cost. Correct Feedback Incorrect Feedback Variable cost per unit = ($522,000 - $378,000)/1,800,000 = $0.08 per unit The marginal cost per unit will be $0.08 since the variable cost per unit will be unchanged. The order should be accepted since the offered price exceeds the marginal cost per unit. Variable cost per unit = ($522,000 - $378,000)/1,800,000 = $0.08 per unit The marginal cost per unit will be $0.08 since the variable cost per unit will be unchanged. The order should be accepted since the offered price exceeds the marginal cost per unit. Add Question Here Question 76 Multiple Choice Question Wexford Industrial Supply is considering a new project with estimated depreciation of $26,000, fixed costs of $79,000, and total sales of $187,000. The variable costs per unit are estimated at $11.80. What is the accounting break-even level of production? Answer 4,871 units 5,333 units 5,415 units 6,949 units 7,248 units Correct Feedback Incorrect Feedback Qaccounting break-even = ($79,000 + $26,000)/[($187,000/Q) $11.80] Q = 6,949 units Qaccounting break-even = ($79,000 + $26,000)/[($187,000/Q) $11.80] Q = 6,949 units Add Question Here Question 77 Multiple Choice Question The accounting break-even production quantity for a project is 11,640 units. The fixed costs are $216,000 and the contribution margin per unit is $28. The fixed assets required for the project will be depreciated on straight-line basis to zero over the project's 5-year life. What is the amount of fixed assets required for this project? Answer $325,920 $549,600 $748,500 $1,080,000 $1,629,600 Correct Feedback Incorrect Feedback Depreciationaccounting break-even = (11,640 $28) $216,000 = $109,920 Fixed asset cost = $109,920 5 = $549,600 Depreciationaccounting break-even = (11,640 $28) $216,000 = $109,920 Fixed asset cost = $109,920 5 = $549,600 Add Question Here Question 78 Multiple Choice Question A project has an accounting break-even point of 15,329 units. The fixed costs are $382,000 and the projected variable cost per unit is $29.10. The project will require $780,000 for fixed assets which will be depreciated straight-line to zero over the project's 6-year life. What is the projected sales price per unit? Answer $47.65 $48.18 $54.02 $56.67 $62.50 Correct Feedback Incorrect Feedback 15,329 = [$382,000 + ($780,000/6)]/(P $29.10); P = $62.50 15,329 = [$382,000 + ($780,000/6)]/(P $29.10); P = $62.50 Add Question Here Question 79 Multiple Choice Question A proposed project has fixed costs of $9,800, depreciation expense of $2,700, and a sales quantity of 2,100 units. The total variable costs are $5,607. What is the contribution margin per unit if the projected level of sales is the accounting break-even point? Answer $3.28 $4.07 $5.95 $6.16 $7.11 Correct Feedback Incorrect Feedback Contribution margin = ($9,800 + $2,700)/2,100 = $5.95 Contribution margin = ($9,800 + $2,700)/2,100 = $5.95 Add Question Here Question 80 Multiple Choice Question Spencer Tools would like to offer a special product to its best customers. However, the firm wants to limit its maximum potential loss on this product to the firm's initial investment in the project. The fixed costs are estimated at $21,000, the depreciation expense is $11,000, and the contribution margin per unit is $12.50. What is the minimum number of units the firm should pre-sell to ensure its potential loss does not exceed the desired level? Answer 1,220 units 1,680 units 2,215 units 2,560 units 2,750 units Correct Feedback Incorrect Feedback Cash break-even point = $21,000/$12.50 = 1,680 units Cash break-even point = $21,000/$12.50 = 1,680 units Add Question Here Question 81 Multiple Choice Question The Motor Works is considering an expansion project with estimated annual fixed costs of $71,000, depreciation of $38,500, variable costs per unit of $17.90 and an estimated sales price of $28 per unit. How many units must the firm sell to break-even on a cash basis? Answer 6,521 units 7,030 units 7,510 units 9,667 units 10,842 units Correct Feedback Incorrect Feedback Qcash break-even = $71,000/($28 $17.90) = 7,030 Qcash break-even = $71,000/($28 $17.90) = 7,030 Add Question Here Question 82 Multiple Choice Question A proposed project has a contribution margin per unit of $13.10, fixed costs of $74,000, depreciation of $12,500, variable costs per unit of $22, and a financial break-even point of 11,360 units. What is the operating cash flow at this level of output? Answer $0 $12,500 $62,309 $74,816 $86,500 Correct Feedback Incorrect Feedback OCFfinancial break-even = (11,360 $13.10) $74,000 = $74,816 OCFfinancial break-even = (11,360 $13.10) $74,000 = $74,816 Add Question Here Question 83 Multiple Choice Question Cantor's has been busy analyzing a new product. Thus far, management has determined that an OCF of $218,200 will result in a zero net present value for the project, which is the minimum requirement for project acceptance. The fixed costs are $329,000 and the contribution margin per unit is $216.40. The company feels that it can realistically capture 2.5 percent of the 110,000 unit market for this product. The tax rate is 34 percent and the required rate of return is 11 percent. Should the company develop the new product? Why or why not? Answer Yes; The project's expected IRR exceeds the required rate of return. Yes; The expected level of sales exceeds the required level of production. No; The required level of production exceeds the expected level of sales. No; The IRR is less than the required rate of return. No; The project will never payback on a discounted basis. Correct Feedback Financial break-even point = ($329,000 + $218,200)/$216.40 = 2,528.65 units Expected sales = 110,000 0.025 = 2,750 units. The project should be accepted because the expected level of sales is greater than the financial break-even quantity. Financial break-even point = ($329,000 + $218,200)/$216.40 = 2,528.65 units Expected sales = 110,000 0.025 = 2,750 units. The project should be accepted because the expected level of sales is greater than the financial break-even quantity. Add Question Here Incorrect Feedback Question 84 Multiple Choice Question Tucker's Trucking is considering a project with a discounted payback period just equal to the project's life. The projections include a sales price of $38, variable cost per unit of $18.50, and fixed costs of $32,000. The operating cash flow is $19,700. What is the break-even quantity? Answer 631 units 1,211 units 1,641 units 2,301 units 2,651 units Correct Feedback Incorrect Feedback Qfinancial break-even = ($32,000 + $19,700)/($38 - $18.50) = 2,651 units Qfinancial break-even = ($32,000 + $19,700)/($38 - $18.50) = 2,651 units Add Question Here Question 85 Multiple Choice Question You are in charge of a project that has a degree of operating leverage of 2.64. What will happen to the operating cash flows if the number of units you sell increase by 6 percent? Answer 15.84 percent decrease 2.27 percent decrease no change 2.27 percent increase 15.84 percent increase Correct Feedback Incorrect Feedback Percentage change in OCF = 2.64 0.06 = 15.84 percent increase Percentage change in OCF = 2.64 0.06 = 15.84 percent increase Add Question Here Question 86 Multiple Choice Question The accounting manager of Gateway Inns has noted that every time the inn's average occupancy rate increases by 2 percent, the operating cash flow increases by 5.3 percent. What is the degree of operating leverage if the contribution margin per unit is $47? Answer 0.38 0.57 1.75 2.10 2.65 Correct Feedback Incorrect Feedback DOL = 0.053/0.02 = 2.65 DOL = 0.053/0.02 = 2.65 Add Question Here Question 87 Multiple Choice Question Steele Insulators is analyzing a new type of insulation for interior walls. Management has compiled the following information to determine whether or not this new insulation should be manufactured. The insulation project has an initial fixed asset requirement of $1.3 million, which would be depreciated straight-line to zero over the 12-year life of the project. Projected fixed costs are $742,000 and the anticipated annual operating cash flow is $241,000. What is the degree of operating leverage for this project? Answer 3.78 3.92 4.08 4.27 4.53 Correct Feedback Incorrect Feedback Degree of operating leverage = 1 + ($742,000/$241,000) = 4.08 Degree of operating leverage = 1 + ($742,000/$241,000) = 4.08 Add Question Here Question 88 Multiple Choice Question You are the manager of a project that has a 2.8 degree of operating leverage and a required return of 14 percent. Due to the current state of the economy, you expect sales to decrease by 7 percent next year. What change should you expect in the operating cash flows next year given your sales prediction? Answer 19.60 percent decrease 16.03 percent decrease 13.46 percent decrease 5.60 percent decrease 2.74 percent decrease Correct Feedback Incorrect Feedback Percentage change in OCF = 2.8 (-0.07) = -0.196 = 19.60 percent decrease Percentage change in OCF = 2.8 (-0.07) = -0.196 = 19.60 percent decrease Add Question Here Question 89 Essay Question What is operating leverage and why is it important in the analysis of capital expenditure projects? Answer Operating leverage is the degree to which a project relies on its fixed costs. The more capital intensive a project, the higher the project's DOL. The higher the DOL, the greater the percentage change in the project's operating cash flows relative to a one percent change in the project's sales quantity. As long as sales are increasing, leverage works fine. However, when sales decline, leverage magnifies the related percentage decline in OCF. Thus, capital intensive firms are more susceptible to forecasting risk. Feedback: Refer to section 11.5 Add Question Here Question 90 Essay Question What is forecasting risk and why is it important to the analysis of capital expenditure projects? What methods can be used to reduce this risk? Answer Forecasting risk is the possibility that errors in projected cash flows will lead to incorrect decisions. Projects are generally accepted when they have positive NPVs and rejected when they have negative NPVs. If the cash inflows of a project are overestimated, the NPV will be overstated potentially resulting in an incorrect acceptance of the project. On the other hand, if cash inflows are underestimated, a good project might be erroneously rejected. To offset some of this risk, managers should employ sensitivity and scenario analysis as well as break-even analysis to better understand the potential outcomes associated with the project. Feedback: Refer to sections 11.1, 11.2, and 11.3 Add Question Here Question 91 Essay Question What are the key features of the accounting, cash, and financial break-even points? Answer Feedback: Refer to sections 11.3 and 11.4 Add Question Here Question 92 Essay Question Assume that a country experiences a financial crisis that causes the nation's financial markets to freeze in a manner that prevents a private firm from raising capital from any source. Explain how project analysis conducted by that firm would work in this situation. Answer This situation is known as hard rationing. In this situation, the firm cannot obtain financing capital regardless of the rate of return offered. Thus, no externally-financed projects would be acceptable based on the normal methods of project analysis. Feedback: Refer to section 11.6 Add Question Here Question 93 Essay Question Mr. Bear, your boss, will only agree to accept a project that, as a minimum, provides a rate of return equal to the requirement he has set for the project. Given this, explain how you can use break-even analysis to ascertain which projects will be acceptable to him as you don't want to risk hearing him growl if you waste his time presenting him with a project that is unacceptable. Answer The financial break-even quantity is the sales quantity required for a project to produce an IRR that equals the required rate of return. Once this quantity has been established and the values used in the computations justified, you would also need to justify that the required level of sales can be obtained. Feedback: Refer to section 11.4 Add Question Here Question 94 Multiple Choice Question Cool Shades, Inc. (CSI) manufactures biotech sunglasses. The variable materials cost is $1.69 per unit, and the variable labor cost is $3.04 per unit. Suppose the firm incurs fixed costs of $750,000 during a year in which total production is 450,000 units and the selling price is $11.50 per unit. What is the cash break-even point? Answer 76,453 units 88,652 units 110,783 units 128,907 units 140,768 units Correct Feedback Incorrect Feedback QCash Break-even = $750,000/($11.50 - $1.69 - $3.04) = 110,783 units QCash Break-even = $750,000/($11.50 - $1.69 - $3.04) = 110,783 units Add Question Here Question 95 Multiple Choice Question Mountain Gear can manufacture mountain climbing shoes for $14.95 per pair in variable raw material costs and $18.46 per paid in variable labor costs. The shoes sell for $127 per pair. Last year, production was 170,000 pairs and fixed costs were $830,000. What is the minimum acceptable total revenue the company should accept for a one-time order for an extra 10,000 pairs? Answer $149,500 $287,600 $334,100 $380,211 $1,164,100 Correct Feedback Incorrect Feedback Marginal total revenue = 10,000 ($14.95 + $18.46) = $334,100 Marginal total revenue = 10,000 ($14.95 + $18.46) = $334,100 Add Question Here Question 96 Multiple Choice Question We are evaluating a project that costs $854,000, has a 15-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 154,000 units per year. Price per unit is $41, variable cost per unit is $20, and fixed costs are $865,102 per year. The tax rate is 33 percent, and we require a 14 percent return on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within 14 percent. What is the worst-case NPV? Answer $984,613 $1,267,008 $1,489,511 $1,782,409 $1,993,870 Correct Feedback OCFWorst = {[($41 0.86) - ($20 1.14)][154,000 0.86] - ($865,102 1.14)}{1 - 0.33) + ($854,000/15)(0.33) = $463,658.70 Incorrect Feedback OCFWorst = {[($41 0.86) - ($20 1.14)][154,000 0.86] - ($865,102 1.14)}{1 - 0.33) + ($854,000/15)(0.33) = $463,658.70 Add Question Here Question 97 Multiple Choice Question A project has a unit price of $5,000, a variable cost per unit of $4,000, fixed costs of $17,000,000, and depreciation expense of $6,970,000. What is the accounting break-even quantity? Answer 6,970 units 10,030 units 17,000 units 21,470 units 23,970 units Correct Feedback Incorrect Feedback QAccounting break-even = ($17,000,000 + $6,970,000)/($5,000 - $4,000) = 23,970 units QAccounting break-even = ($17,000,000 + $6,970,000)/($5,000 - $4,000) = 23,970 units Add Question Here Question 98 Multiple Choice Question A project has the following estimated data: price = $74 per unit; variable costs = $39.22 per unit; fixed costs = $6,500; required return = 8 percent; initial investment = $8,000; life = 4 years. Ignore the effect of taxes. What is the degree of operating leverage at the financial break-even level of output? Answer 2.716 3.691 4.528 6.003 7.337 Correct Feedback DOL = 1 + (6,500/$2,415.37) = 3.691 Incorrect Feedback DOL = 1 + (6,500/$2,415.37) = 3.691 Add Question Here Question 99 Multiple Choice Question Consider a project with the following data: accounting break-even quantity = 29,000 units; cash breakeven quantity = 15,950 units; life = 10 years; fixed costs = $203,000; variable costs = $24 per unit; required return = 14 percent; depreciation = straight line. Ignoring the effect of taxes, what is the financial break-even quantity? Answer 38,723 units 39,201 units 39,458 units 39,624 units 40,969 units Correct Feedback 15,950 = $203,000/(P - $24); P = $36.727273 29,000 = ($203,000 + D)/($36.727273 - $24); D = $166,090.90 Initial investment = 10 $166,090.90 = $1,660,909 QF = ($203,000 + $318,418.75)/($36.727273 - $24) = 40,969 units Incorrect Feedback 15,950 = $203,000/(P - $24); P = $36.727273 29,000 = ($203,000 + D)/($36.727273 - $24); D = $166,090.90 Initial investment = 10 $166,090.90 = $1,660,909 QF = ($203,000 + $318,418.75)/($36.727273 - $24) = 40,969 units Add Question Here Question 100 Multiple Choice Question At an output level of 50,000 units, you calculate that the degree of operating leverage is 1.8. What will be the percentage change in operating cash flow if the new output level is 54,500 units? Answer 5.00 percent 6.17 percent 16.20 percent 17.43 percent 20.00 percent Correct Feedback Incorrect Feedback DOL = 1.8 = Percentage change in OCF/[54,500 - 50,000)/50,000]; %OCF = 16.20 percent DOL = 1.8 = Percentage change in OCF/[54,500 - 50,000)/50,000]; %OCF = 16.20 percent Add Question Here Question 101 Multiple Choice Question A proposed project has fixed costs of $36,000 per year. The operating cash flow at 18,000 units is $67,000. What will be the new degree of operating leverage if the number of units sold rises to 18,500? Answer 1.46 1.52 1.67 2.08 2.14 Correct Feedback DOL = 1 + ($36,000/$67,000) = 1.537313 Percentage change in Q = (18,500 - 18,000)/18,000 = 2.7778 percent At 18,500 units, percentage change in OCF = 1.537313 .027778 = 4.2703 percent New OCF = $67,000 (1 + 0.042703) = $69,861 At 18,500 units, DOL = 1 + ($36,000/$69,861) = 1.52 DOL = 1 + ($36,000/$67,000) = 1.537313 Percentage change in Q = (18,500 - 18,000)/18,000 = 2.7778 percent At 18,500 units, percentage change in OCF = 1.537313 .027778 = 4.2703 percent New OCF = $67,000 (1 + 0.042703) = $69,861 At 18,500 units, DOL = 1 + ($36,000/$69,861) = 1.52 Add Question Here Incorrect Feedback Question 102 Multiple Choice Question Consider a 6-year project with the following information: initial fixed asset investment = $460,000; straight-line depreciation to zero over the 6-year life; zero salvage value; price = $34; variable costs = $19; fixed costs = $188,600; quantity sold = 90,528 units; tax rate = 32 percent. What is the sensitivity of OCF to changes in quantity sold? Answer $10.20 per unit $11.16 per unit $11.38 per unit $12.33 per unit $12.54 per unit Correct Feedback OCF = [($34 - $19) 90,528 - 188,600][1 - 0.32] + [($460,000/6) 0.32] = $819,670.93 Using 91,528 units: (You can use any amount as the second level of quantity sold as the sensitivity will be the same.) OCF = [($34 - $19) 91,528 - 188,600][1 - 0.32] + [($460,000/6) 0.32] = $829,870.93 Sensitivity = ($829,870.93 - $819,670.93)/(91,528 - 90,528) = $10.20 Incorrect Feedback OCF = [($34 - $19) 90,528 - 188,600][1 - 0.32] + [($460,000/6) 0.32] = $819,670.93 Using 91,528 units: (You can use any amount as the second level of quantity sold as the sensitivity will be the same.) OCF = [($34 - $19) 91,528 - 188,600][1 - 0.32] + [($460,000/6) 0.32] = $829,870.93 Sensitivity = ($829,870.93 - $819,670.93)/(91,528 - 90,528) = $10.20 Add Question Here Question 103 Multiple Choice Question You are considering a new product launch. The project will cost $630,000, have a 5-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 160 units per year, price per unit will be $24,000, variable cost per unit will be $12,000, and fixed costs will be $283,000 per year. The required return is 11 percent and the relevant tax rate is 34 percent. Based on your experience, you think the unit sales, variable cost, and fixed cost projections given here are probably accurate to within 9 percent. What is the worst case NPV? Answer $3,417,907 $2,654,241 $888,618 $3,102,134 $3,458,020 Correct Feedback Unit salesWorst = 160 (1 - 0.09) = 145.6 units Variable cost per unitWorst = $12,000 (1 + 0.09) = $13,080 Fixed costsWorst = $283,000 (1 + 0.09) = $308,470 OCFWorst = [($24,000 - $13,080)(145.6) - $308,470][1 - 0.34] + 0.34($630,000/5) = $888,618.12 Incorrect Feedback Unit salesWorst = 160 (1 - 0.09) = 145.6 units Variable cost per unitWorst = $12,000 (1 + 0.09) = $13,080 Fixed costsWorst = $283,000 (1 + 0.09) = $308,470 OCFWorst = [($24,000 - $13,080)(145.6) - $308,470][1 - 0.34] + 0.34($630,000/5) = $888,618.12 Add Question Here Question 104 Multiple Choice Question McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $500 per set and have a variable cost of $200 per set. The company spent $113,000 for a marketing study that determined the company will sell 58,000 sets per year for 7 years. The marketing study also determined that the company will lose sales of 15,000 sets of its high-priced clubs. The high-priced clubs sell at $700 and have variable costs of $300. The company will also increase sales of its cheap clubs by 9,000 sets. The cheap clubs sell for $200 and have variable costs of $100 per set. The fixed costs each year will be $7,559,000. The company has also spent $1,133,000 on research and development for the new clubs. The plant and equipment required will cost $21,000,000 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $1,053,000 that will be returned at the end of the project. The tax rate is 40 percent, and the cost of capital is 8 percent. What is the IRR? Answer 7.51 percent 7.82 percent 8.13 percent 8.49 percent 8.62 percent Correct Feedback Sales = ($500 58,000) + ($700 (-15,000)) + $200 9,000) = $20,300,000 Variable costs = (-$200 58,000) + (-$300 (-15,000)) + (-$100 9,000) = -$8,000,000 Depreciation = $21,000,000/7 = $3,000,000 Incorrect Feedback Sales = ($500 58,000) + ($700 (-15,000)) + $200 9,000) = $20,300,000 Variable costs = (-$200 58,000) + (-$300 (-15,000)) + (-$100 9,000) = -$8,000,000 Depreciation = $21,000,000/7 = $3,000,000 Add Question Here Question 105 Multiple Choice Question Hybrid cars are touted as a "green" alternative; however, the financial aspects of hybrid ownership are not as clear. Consider a hybrid model that has a list price of $5,420 (including tax consequences) more than a comparable car with a traditional gasoline engine. Additionally, the annual ownership costs (other than fuel) for the hybrid were expected to be $420 more than the traditional model. The EPA mileage estimate is 23 mpg for the traditional model and 25 mpg for the hybrid model. Assume the appropriate interest rate is 10 percent, all cash flows occur at the end of the year, you drive 15,900 miles per year, and keep either car for 6 years. What price per gallon would make the decision to buy they hybrid worthwhile? Answer $18.79 $21.48 $27.19 $28.32 $30.10 Correct Feedback Incorrect Feedback Add Question Here Question 106 Multiple Choice Question In an effort to capture the large jet market, Hiro Airplanes invested $12.68 billion developing its B490, which is capable of carrying 800 passengers. The plane has a list price of $275 million. In discussing the plane, Hiro Airplanes stated that the company would break-even when 246 B490s were sold. Assume the break-even sales figure given is the cash flow break-even. Suppose the sales of the B490 last for only 9 years. How many airplanes must Hiro Airplanes sell per year to provide its shareholders a 19 percent rate of return on this investment? Answer 47.17 52.48 59.09 63.10 68.40 Correct Feedback Cash flow per plane = $12,680,000,000/246 = $51,544,715 C = Annual cash flow necessary to deliver a 19 percent return Incorrect Feedback Cash flow per plane = $12,680,000,000/246 = $51,544,715 C = Annual cash flow necessary to deliver a 19 percent return Add Question Here

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Odessa - FIN - 600
COURSES > FUNDAMENTALS OF CORPORATE FINANCE:, 9/E- ROSS > CONTROL PANEL > POOL MANAGER > POOL CANVASPool CanvasAdd, modify, and remove questions. Select a question type from the Add Question drop-down list and click Go to add questions. Use Creation Set
Odessa - FIN - 600
COURSES > FUNDAMENTALS OF CORPORATE FINANCE:, 9/E- ROSS > CONTROL PANEL > POOL MANAGER > POOL CANVASPool CanvasAdd, modify, and remove questions. Select a question type from the Add Question drop-down list and click Go to add questions. Use Creation Set
Odessa - FIN - 600
COURSES > FUNDAMENTALS OF CORPORATE FINANCE:, 9/E- ROSS > CONTROL PANEL > POOL MANAGER > POOL CANVASPool CanvasAdd, modify, and remove questions. Select a question type from the Add Question drop-down list and click Go to add questions. UseCreation Set
Odessa - FIN - 600
COURSES > FUNDAMENTALS OF CORPORATE FINANCE:, 9/E- ROSS > CONTROL PANEL > POOL MANAGER > POOL CANVASPool CanvasAdd, modify, and remove questions. Select a question type from the Add Question drop-down list and click Go to add questions. Use Creation Set
Odessa - FIN - 600
COURSES > FUNDAMENTALS OF CORPORATE FINANCE:, 9/E - ROSS > CONTROL PANEL > POOL MANAGER > POOL CANVASPool CanvasAdd, modify, and remove questions. Select a question type from the Add Question drop-down list and click Go to add questions. Use Creation Se
Odessa - FIN - 600
COURSES > FUNDAMENTALS OF CORPORATE FINANCE:, 9/E- ROSS > CONTROL PANEL > POOL MANAGER > POOL CANVASPool CanvasAdd, modify, and remove questions. Select a question type from the Add Question drop-down list and click Go to add questions. Use Creation Set
Odessa - FIN - 600
COURSES > FUNDAMENTALS OF CORPORATE FINANCE:, 9/E- ROSS > CONTROL PANEL > POOL MANAGER > POOL CANVASPool CanvasAdd, modify, and remove questions. Select a question type from the Add Question drop-down list and click Go to add questions. Use Creation Set
Odessa - FIN - 600
COURSES > FUNDAMENTALS OF CORPORATE FINANCE:, 9/E- ROSS > CONTROL PANEL > POOL MANAGER > POOL CANVASPool CanvasAdd, modify, and remove questions. Select a question type from the Add Question drop-down list and click Go to add questions. Use Creation Set
Odessa - FIN - 600
COURSES > FUNDAMENTALS OF CORPORATE FINANCE:, 9/E- ROSS > CONTROL PANEL > POOL MANAGER > POOL CANVASPool CanvasAdd, modify, and remove questions. Select a question type from the Add Question drop-down list and click Go to add questions. Use Creation Set
Boston Conservatory - MG - mg
SFASU - BUS - 11111
1) Ethicscanbedefinedasthestudyof 2) Businessethicsfocuseson a) Whatconstitutesrightandwrongbehavior a) whatconstitutesethicalbehaviorinthebusinessworld 3) Onewayinwhichbusinessescanbetterpromoteethicalbehaviorintheworkplaceistoinstitute4) Whichactrequi
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Case112 A)SchmidtofferstosellBarryequipmentfor$10,000.Priortotheacceptance Schmidtdies&BarryisunawareofSchmidtsdeath.Schmidtsofferpriorto acceptanceisautomaticallyterminatedaccordingtotheoperationoflaw;death oftheofferororofferee.Schmidtsofferisterminated
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SFASU - MKT - 11111
KariEckblad September29,2009 MKT351 Homework#2 AmericansthathaveusedalaptopandusewirelessInternetis39%.The amountofAmericansthatgoononlineandusetheirPDAsforinternet,checking emailsandinstantmessagingoncellphonesis32%.Onlyasmallsectionof peopleuseebooks,am
SFASU - MKT - 11111
KariEckblad MKT351 October30,2009 HomeworkAssignment#3AmazonGrocery Amazon.comisagreatplacetopurchasenonperishablegroceries,inthe convenienceofyourhomebutatacost.Thecostisthat,Amazon.comonly offerslargequantitiesintheproducts,whichwereselectedfortheassign
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$20 off any refurbished Dell S2009W, S2209W, or S2309W monitor at http:/bit.ly/apjvg - Enter code at che KariEckblad 19 minutes ago from CoTweet MKT351 11/12/09 HomeworkAssignment#4Twitter OntheDellOutletsTwitterpage,themostrecentTwitterwas,November 12,20
SFASU - MKT - 11111
KariEckblad MKT351 December1,2009 HomeworkAssignment#5MarketingCareers ThemarketingcareerthatIammostinterestedinwouldbeabrand manager.Asabrandmanager,Iwoulddevelop,plananddirectthemarketing aspectofacertainbrand.Iwouldworkalongsidewithpeoplewhoarealso coo
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Brittany Stephen Kari Eckblad Byron Winfree Homework #8 1. S = $50 D = 20,000 H = $.50 Workdays = 250 a) EOQ = sqrt(2SD/H) = 2,000 = Q b) orders = D/Q = 10 c) annual oc = SD/Q = $500 d) oct = workdays/(D/Q) = 25 e) 0 f) 2,000 g) avg = Q/2 = 1,000 h) annua
SFASU - MKT - 11111
Netflix, Inc. (Nasdaq: NFLX) is the world's largest online movie rental service, providing more than 8 million subscribers access to more than 100,000 DVD ti tles plus a growing library of more than 10,000 choices t hat can be watched instantly on their P
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KariEckblad MKT351 September10,2009 PodcastingHomework ThepodcastentitledBigger,BetterUltraThinLaptopsexplainshowthin laptopsareahugepartofthebusinessworldbutatalowercost.Thesethin laptopsaremainlyusedbythehighendexecutivesoflargecorporations.The thinlapt
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KariEckblad MKT351 October30,2009 HomeworkAssignment#3AmazonGrocery Amazon.comisagreatplacetopurchasenonperishablegroceries,inthe convenienceofyourhomebutatacost.Thecostisthat,Amazon.comonly offerslargequantitiesintheproducts,whichwereselectedfortheassign
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Network Pop Quiz 1Brought to you by www.RMRoberts.com please visit our site! This is a set of questions to help you prepared for the CompTIA Network+ certification examination. You should not exceed twenty minutes for completing this examination. 1. Whic
Tennessee - CIT - 601
Network Practice Test for CompTIA - Domain 3Brought to you by www.RMRoberts.com please visit our site! This practice exam is based on the CompTIA Network+ Domain 3 test objectives. Before attempting this exam you should have competed and studied the Netw
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Network Practice Test for CompTIA - Domain 2Brought to you by www.RMRoberts.com please visit our site!2006 Network Domain 2 - Practice ExamThis practice exam is based on the CompTIA Network+ Domain 2 test objectives. Before attempting this exam you sho
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Network Practice Test for CompTIA - Domain 1Brought to you by www.RMRoberts.com please visit our site!2006 Network Domain1 - Practice ExamThis practice exam is based on the CompTIA Network+ Domain 1 test objectives. Before attempting this exam you shou
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CompTIA A+ 220-602 2006 Examination ObjectivesIntroductionIn order to receive CompTIA A+ certification a candidate must pass two exams. The first exam is CompTIA A+ Essentials. Objectives for the CompTIA A+ Essentials Examination are available for publi
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SECTION A Which of the following is the most secure type system? 1. NTFS Which of the following has to be installed on a latptop in order to use a compact flash drive? 1. A multi-media card reader When a user is typing on a laptop the curser sometimes mov
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70-270: MCSE Guide to Microsoft Windows XP ProfessionalSecond Edition, Enhanced Chapter 14: Windows XP Professional Fault ToleranceObjectives Define IntelliMirror technology and describe its key features Back up data and settings on Windows XP Professi
Tennessee - CIT - 601
Tennessee - CIT - 601
70-270: MCSE Guide toMicrosoft Windows XP ProfessionalSecond Edition, EnhancedChapter 12: Working With the Windows XP RegistryObjectives Understand the function and structure of the Registry Describe the purpose of the Registry keys and the hive file
Tennessee - CIT - 601
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Tennessee - CIT - 601
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Tennessee - CIT - 601
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Tennessee - CIT - 601
70-270: MCSE Guide toMicrosoft Windows XP Professional Second Edition, Enhanced Chapter 4: Managing Windows XP File Systems and StorageObjectives Understand basic and dynamic storage Understand the drive configurations supported by Windows XP Understan
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Tennessee - CIT - 601
Tennessee - CIT - 601
70-270: MCSE Guide to Microsoft Windows XP Professional Second Edition, EnhancedChapter 1: Introduction to Windows XP ProfessionalObjectives Describe the Windows Networking family of products Describe the major features of the Windows XP environment Un
Tennessee - CIT - 601
Alan Simpsons Windows XP BibleSecond Edition Alan SimpsonAlan Simpsons Windows XP BibleSecond EditionAlan Simpsons Windows XP BibleSecond Edition Alan SimpsonAlan Simpsons Windows XP Bible, Second Edition Published by Wiley Publishing, Inc. 10475 Cr
Tennessee - CIT - 601
A01T621527.fm Page 1 Tuesday, January 11, 2005 8:54 PMPUBLISHED BY Microsoft Press A Division of Microsoft Corporation One Microsoft Way Redmond, Washington 98052-6399 Copyright 2005 by Microsoft Corporation All rights reserved. No part of the contents o
Tennessee - CIT - 601
PUBLISHED BY Microsoft Press A Division of Microsoft Corporation One Microsoft Way Redmond, Washington 98052-6399 Copyright 2006 by Microsoft Corporation All rights reserved. No part of the contents of this book may be reproduced or transmitted in any for
Tennessee - CIT - 601
Tennessee - CIT - 601
A+ Study Guide: Domain 8.0: Communication and ProfessionalismIntroduction: There isn't much that we can provide for you in this section as it is mostly just common sense, even if you have bad customer service skills (you are in the wrong business though)
Tennessee - CIT - 601
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Tennessee - CIT - 601
A+ Study Guide: Domain 6.0: Security - Security ThreatsIntroduction: Previous versions of the A+ exams contained very little about security, however, the new exam gives it a weighting of 11%. This is because the incedence and sophistication of attacks co
Tennessee - CIT - 601
A+ Study Guide: Domain 5.0: Networks - Network TypesIntroduction: In this section, we will take a look at the various networking technologies that an A+ technician will likely run across and will be tested on the exam. Network Models: There are 2 basic n
Tennessee - CIT - 601
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Tennessee - CIT - 601
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Tennessee - CIT - 601
A+ Study Guide: Domain 2.0: Laptops and Portable Devices - Laptop HardwareIntroduction: This is the first tutorial in our Laptop and Portable devices guide. There are many different terms used for these devices including portable computers, notebooks, an
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University of Florida - EGM - EGM 2511
University of Florida - EGM - EGM 2511
University of Florida - EGM - EGM 2511
University of Florida - EGM - EGM 2511
University of Florida - EGM - EGM 2511
University of Florida - EGM - EGM 2511
University of Florida - EGM - EGM 2511