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KIC000186 - Name Quiz#2 FIN 310 Corporate Finance Section B...

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Name: _ Quiz #2 FIN 310, Corporate Finance, Section B Please circle one of the possible answers (5 points each): I. A firm with high operating leverage is characterized by while one with high financial leverage is characterized by _ a. lowfixed cost of production; low fixed financial costs b. high variable cost of production; high variable financial costs Q) high fixed costs of production; high fixed financial costs d. lowcosts of production; high fixed financial costs e. high fixed costs of production; lowvariable financial costs 2. The discounted payback rule may cause: a. some positive net present value projects to berejected. b. the most liquid projects to be rejected in favor of less liquid projects. c. projects to be incorrectly accepted due to ignoring the time value of money. d. some projects with negative net present values to be accepted. @ Both A and D. 3. Your firm has annual fixed costs of $200,000, a selling price of $16 per widget, variable costs of $7 per widget. Calculate the break-even point. 22,222.22 widgets 12,500.00 widgets c. 5,000 widgets d. $12,500.00 e. $5,000 Please answer the following questions and show all your work (15 points each):
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