You are considering a project and are concerned about the reliability of the

You are considering a project and are concerned about

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1.You are considering a project and are concerned about the reliability of the cash flowforecasts. To reduce any potentially harmful results from accepting this project, you shouldconsider:A.B. C. D. E. Lowering the degree of operating leverage.Lowering the contribution margin per unit.Increasing the initial cash outlay.Increasing the fixed costs per unit.Lowering the operating cash flow. AACSB: AnalyticAccessibility: Keyboard NavigationBlooms: AnalyzeDifficulty: IntermediateLearning Objective: 11-04 How the degree of operating leverage can affect the cash flows of a project.Section: 11.5 Operating LeverageTopic: Operating leverage52.Which one of the following characteristics best describes a project that has a low degree ofoperating leverage?High variable costs relative to the fixed costs.Relatively high initial cash outlay.OCF that is highly sensitive to the sales quantity.High level of forecasting risk.High depreciation expense. AACSB: AnalyticAccessibility: Keyboard NavigationBlooms: AnalyzeDifficulty: IntermediateLearning Objective: 11-04 How the degree of operating leverage can affect the cash flows of a project.Section: 11.5 Operating LeverageTopic: Operating leverage
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53.Which one of the following will best reduce the risk of a project by lowering the degree ofoperating leverage?Hiring additional employees rather than using temporary outside contractors.Subcontracting portions of the project rather than purchasing new equipment to do all the work in-house.Buying equipment rather than leasing it short-term.Lowering the projected selling price per unit.Changing the proposed labor-intensive production method to a more capital intensive method. AACSB: AnalyticAccessibility: Keyboard NavigationBlooms: AnalyzeDifficulty: IntermediateLearning Objective: 11-04 How the degree of operating leverage can affect the cash flows of a project.Section: 11.5 Operating LeverageTopic: Operating leverage54.The degree of operating leverage is equal to:1 + OCF / (FC + VC).1 + OCF / FC.1 + FC/OCF.1 + VC/OCF.1 - (FC + VC)/OCF. AACSB: AnalyticAccessibility: Keyboard NavigationBlooms: RememberDifficulty: BasicLearning Objective: 11-04 How the degree of operating leverage can affect the cash flows of a project.Section: 11.5 Operating LeverageTopic: Operating leverage
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55.Uptown Promotions has three divisions. As part of the planning process, the CFO requestedthat each division submit its capital budgeting proposals for next year. These proposalsrepresent 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. For the firmas a whole, management has limited spending to $10 million for new projects next yeareven though the firm could afford additional investments. This is an example of:A. B. C. D.E. Scenario analysis.Sensitivity analysis.An operating leverage application.Soft rationing.
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