Question 1

At a production level of 5,600 units a project has total costs of $89,000. The variable cost per unit is $11.20. What is the amount of the total ﬁxed costs if the production level is increased to 6,100
Units without increasing the total ﬁxed assets?

Accepted Answer

A)   $24,126
B)   $26,280
C)   $27,090
D)   $27,820
E)   $28,626F) B) and C)
G) A) and E)

Question 2

Provide a deﬁnition for the term operating leverage.

Accepted Answer

The degree to which ...

Question 3

Which of the following best describe the term managerial options or real options.

Accepted Answer

A)   The percentage change in operating cash ﬂow relative to the percentage change in quantity sold.
B)   The sales level that results in a zero NPV.
C)   Costs that do not change when the quantity of output changes during a particular time period.
D)   The possibility that errors in projected cash ﬂows lead to incorrect decisions.
E)   Opportunities that managers can exploit if certain things happen in the future.F) C) and D)
G) A) and B)

Question 4

Assume that you graph the changes in net present value against the changes in the value of a single variable used in a project. The steepness of the resulting function illustrates the:

Accepted Answer

A)   Degree of operating leverage within the project.
B)   Trade-off of variable versus ﬁxed costs utilized by the project.
C)   Range of total outcomes possible from accepting a proposed project.
D)   Contribution margin of the project at various levels of output.
E)   Degree of sensitivity of a project's outcome to a single variable of the project.F) A) and D)
G) B) and E)

Question 5

The accounting break-even point has a net income is zero.

Accepted Answer

A) True 
 B)False

Question 6

All else equal, if you decrease your level of ﬁxed costs, cash break-even will also fall.

Accepted Answer

A) True 
 B)False

Question 7

Given the following information, calculate OCF at the accounting break-even point. Price = $30; variable cost = $10; ﬁxed cost = $25,000; depreciation = $5,000; tax rate = 34%.

Accepted Answer

A)   $1,750
B)   $5,000
C)   $15,000
D)   $25,000
E)   $35,000F) None of the above
G) B) and E)

Question 8

Jackson Samuelson would like to add a new product to complete their lineup. The ﬁnancial manager wants to know how many units the ﬁrm must sell to limit their potential loss to their initial
Investment. What is this quantity if their annual ﬁxed costs are $36,000, the annual depreciation
Expense is $17,900, and the contribution margin is $3.20?

Accepted Answer

A)   5,594 units
B)   5,656 units
C)   6,133 units
D)   11,250 units
E)   16,844 unitsF) A) and B)
G) B) and D)

Question 9

Margerit is reviewing a project with projected sales of 1,500 units a year, a cash ﬂow of $40 a unit and a three-year project life. The initial cost of the project is $95,000. The relevant discount rate is
15 percent. Margerit has the option to abandon the project after one year at which time she feels
She could sell the project for $60,000. At what level of sales should she be willing to abandon the
Project?

Accepted Answer

A)   899 units
B)   923 units
C)   967 units
D)   1,199 units
E)   1,206 unitsF) A) and E)
G) B) and D)

Question 10

If a ﬁrm's ﬁxed costs are exactly equal to its depreciation expense, and both are greater than zero, then at its cash break-even point the DOL ______________.

Accepted Answer

A)   Is equal to one.
B)   Is equal to two.
C)   Is greater than two.
D)   Is undeﬁned since you can't divide by zero.
E)   Cannot be determined without more information.F) D) and E)
G) B) and E)

Question 11

Conducting scenario analysis helps managers see the:

Accepted Answer

A)   Impact of an individual variable on the outcome of a project.
B)   Potential range of outcomes from a proposed project.
C)   Changes in long-term debt over the course of a proposed project.
D)   Possible range of market prices for their stock over the life of a project.
E)   Allocation distribution of funds for capital projects under conditions of hard rationing.F) A) and B)
G) A) and C)

Question 12

As the degree of sensitivity of a project to a single variable rises, the:

Accepted Answer

A)   Lower the forecasting risk of the project.
B)   Smaller the range of possible outcomes given a pre-deﬁned range of values for the input.
C)   More attention management should place on accurately forecasting the future value of that variable.
D)   Lower the maximum potential value of the project.
E)   Lower the maximum potential loss of the project.F) B) and C)
G) C) and D)

Question 13

A project with IRR = __________ just breaks even in a ﬁnancial sense.

Accepted Answer

A)   0%
B)   AAR
C)   the project's required return
D)   100%
E)   -100%F) None of the above
G) A) and E)

Question 14

Fixed costs per unit remain constant over a given range of production output.

Accepted Answer

A) True 
 B)False

Question 15

A project has the following estimated data: price = $800 per unit; variable costs = $650 per unit; ﬁxed costs = $900,000; required return = 8%; initial investment = $5,500,000; $500,000 salvage
Value; life = 14 years. What is the degree of operating leverage at the ﬁnancial break-even level of
Output?

Accepted Answer

A)   2.09
B)   2.19
C)   2.29
D)   2.39
E)   2.49F) C) and D)
G) B) and E)

Question 16

A combination of scenario and sensitivity analysis is called:

Accepted Answer

A)   The upper and lower bound method.
B)   The accounting breakeven method.
C)   Financial breakeven analysis.
D)   Simulation analysis.
E)   Incremental revenue analysis.F) A) and D)
G) All of the above

Question 17

The higher the degree of operating leverage, the lower the break-even point, regardless of how it's
measured.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following best describe the term ﬁnancial break-even.

Accepted Answer

A)   The percentage change in operating cash ﬂow relative to the percentage change in quantity sold.
B)   The sales level that results in a zero NPV.
C)   Costs that do not change when the quantity of output changes during a particular time period.
D)   The possibility that errors in projected cash ﬂows lead to incorrect decisions.
E)   Opportunities that managers can exploit if certain things happen in the future.F) A) and D)
G) B) and D)

Question 19

Provide a deﬁnition for the term accounting break-even.

Accepted Answer

The sales level that...

Question 20

Which of the following best describe the term degree of operating leverage.

Accepted Answer

A)   The percentage change in operating cash ﬂow relative to the percentage change in quantity sold.
B)   The sales level that results in a zero NPV.
C)   Costs that do not change when the quantity of output changes during a particular time period.
D)   The possibility that errors in projected cash ﬂows lead to incorrect decisions.
E)   Opportunities that managers can exploit if certain things happen in the future.F) None of the above
G) A) and B)

Exam 11: Project Analysis and Evaluation

Conducting scenario analysis helps managers see the:

Correct Answer
verified

Which of the following best describe the term managerial options or real options.

Correct Answer
verified

Given the following information, calculate OCF at the accounting break-even point. Price = $30; variable cost = $10; ﬁxed cost = $25,000; depreciation = $5,000; tax rate = 34%.

Correct Answer
verified

Fixed costs per unit remain constant over a given range of production output.

Correct Answer
verified

Which of the following best describe the term degree of operating leverage.

Correct Answer
verified

Correct Answer
verified

All else equal, if you decrease your level of ﬁxed costs, cash break-even will also fall.

Correct Answer
verified

Provide a deﬁnition for the term accounting break-even.

Correct Answer
verified
The sales level that...
View Answer

Which of the following best describe the term ﬁnancial break-even.

Correct Answer
verified

Correct Answer
verified

The accounting break-even point has a net income is zero.

Correct Answer
verified

If a ﬁrm's ﬁxed costs are exactly equal to its depreciation expense, and both are greater than zero, then at its cash break-even point the DOL ______________.

Correct Answer
verified

Correct Answer
verified

The higher the degree of operating leverage, the lower the break-even point, regardless of how it's measured.

Correct Answer
verified

A project with IRR = __________ just breaks even in a ﬁnancial sense.

Correct Answer
verified

Provide a deﬁnition for the term operating leverage.

Correct Answer
verified
The degree to which ...
View Answer

As the degree of sensitivity of a project to a single variable rises, the:

Correct Answer
verified

Assume that you graph the changes in net present value against the changes in the value of a single variable used in a project. The steepness of the resulting function illustrates the:

Correct Answer
verified

A combination of scenario and sensitivity analysis is called:

Correct Answer
verified

At a production level of 5,600 units a project has total costs of $89,000. The variable cost per unit is $11.20. What is the amount of the total ﬁxed costs if the production level is increased to 6,100 Units without increasing the total ﬁxed assets?

Correct Answer
verified

Exam 11: Project Analysis and Evaluation

Conducting scenario analysis helps managers see the:

Correct AnswerverifiedShow Answer

Which of the following best describe the term managerial options or real options.

Correct AnswerverifiedShow Answer

Given the following information, calculate OCF at the accounting break-even point. Price = $30; variable cost = $10; ﬁxed cost = $25,000; depreciation = $5,000; tax rate = 34%.

Correct AnswerverifiedShow Answer

Fixed costs per unit remain constant over a given range of production output.

Correct AnswerverifiedShow Answer

Which of the following best describe the term degree of operating leverage.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

All else equal, if you decrease your level of ﬁxed costs, cash break-even will also fall.

Correct AnswerverifiedShow Answer

Provide a deﬁnition for the term accounting break-even.

Correct AnswerverifiedThe sales level that...View AnswerShow Answer

Which of the following best describe the term ﬁnancial break-even.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The accounting break-even point has a net income is zero.

Correct AnswerverifiedShow Answer

If a ﬁrm's ﬁxed costs are exactly equal to its depreciation expense, and both are greater than zero, then at its cash break-even point the DOL ______________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The higher the degree of operating leverage, the lower the break-even point, regardless of how it's measured.

Correct AnswerverifiedShow Answer

A project with IRR = __________ just breaks even in a ﬁnancial sense.

Correct AnswerverifiedShow Answer

Provide a deﬁnition for the term operating leverage.

Correct AnswerverifiedThe degree to which ...View AnswerShow Answer

As the degree of sensitivity of a project to a single variable rises, the:

Correct AnswerverifiedShow Answer

Assume that you graph the changes in net present value against the changes in the value of a single variable used in a project. The steepness of the resulting function illustrates the:

Correct AnswerverifiedShow Answer

A combination of scenario and sensitivity analysis is called:

Correct AnswerverifiedShow Answer

At a production level of 5,600 units a project has total costs of $89,000. The variable cost per unit is $11.20. What is the amount of the total ﬁxed costs if the production level is increased to 6,100 Units without increasing the total ﬁxed assets?

Correct AnswerverifiedShow Answer

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The sales level that...
View Answer

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The degree to which ...
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