Corp.fin, Test 4solution

# Corp.fin, Test 4solution - Test 4 Name 1 Variable costs a...

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Test 4 Name __________________ 1. Variable costs: a. change in direct relationship to the quantity of output produced. b. are constant in the short-run regardless of the quantity of output produced. c. are equal to the change in a variable when one more unit of output is produced. d. are subtracted from fixed costs to compute the contribution margin. e. form the basis that is used to determine the degree of operating leverage employed by a firm. 2. Which one of the following is most likely a variable cost? a. office rent b. property taxes c. property insurance d. direct labor costs e. management salaries 3. Fixed costs: a. change as the quantity of output produced changes. b. are constant over the short-run regardless of the quantity of output produced. c. reflect the change in a variable when one more unit of output is produced. d. are subtracted from sales to compute the contribution margin. e. can be ignored in scenario analysis since they are constant over the life of a project. 4. Sensitivity analysis is conducted by:

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a. holding all variables at their base level and changing the required rate of return assigned to a project. b. changing the value of two variables to determine their interdependency. c. changing the value of a single variable and computing the resulting change in the current value of a project. d. assigning either the best or the worst possible value to every variable and comparing the results to those achieved by the base case. e. managers after a project has been implemented to determine how each variable relates to the level of output realized. 5. In a decision tree, the NPV to make the yes/no decision is dependent on:
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## This note was uploaded on 06/18/2010 for the course MBA MBA 5131 taught by Professor Mm during the Summer '10 term at Cumberland TN.

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Corp.fin, Test 4solution - Test 4 Name 1 Variable costs a...

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