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1 | |
The degree of operating leverage is equal to the percentage change in the operating cash flow divided by the percentage change in sales quantity. |
| | A) | True |
| | B) | False |
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2 | |
A project that just breaks even on a cash basis must have a zero net present value. |
| | A) | True |
| | B) | False |
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3 | |
A project that just breaks even on an accounting basis has a discounted payback period equal to its life. |
| | A) | True |
| | B) | False |
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4 | |
If a division of a firm finds an exceptionally worthwhile positive net present value project they still will not be able to obtain funding if they are under hard rationing. |
| | A) | True |
| | B) | False |
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5 | |
Which of the following statements are true concerning scenario analysis? I. A positive net present value for a project's worst case scenario guarantees you a positive return from the project.
II. The base case scenario generally represents an average estimate of the net present value.
III. If the net present value of the best case scenario is negative then it is probably unnecessary to create base and worst case scenarios.
IV. Scenario analysis is less apt than sensitivity analysis to determine which variable has the greatest impact on the projected net present value.
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| | A) | I and II only |
| | B) | II and IV only |
| | C) | III and IV only |
| | D) | I, II, and III only |
| | E) | II, III, and IV only |
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6 | |
Any time a manager replaces a variable cost with a fixed cost, the firm's _____ effectively increases. |
| | A) | operating leverage |
| | B) | managerial options |
| | C) | projected cash flow |
| | D) | sensitivity contribution |
| | E) | total variable cost |
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7 | |
Which of the following describe(s) variable costs?I. costs that can be forecasted with a high degree of accuracy
II. costs that are equal to zero when production is zero
III. costs that change with the quantity of output
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| | A) | II only |
| | B) | I and II only |
| | C) | I and III only |
| | D) | II and III only |
| | E) | I, II, and III only |
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8 | |
Which of the following requires finding the point at which the net present value of a project is equal to zero?I. finding the project's internal rate of return
II. finding the point at which the internal rate of return is equal to zero
III. finding the point at which the project pays back on a discounted basis
IV. finding the financial break-even point
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| | A) | I and III only |
| | B) | II and IV only |
| | C) | I, II, and III only |
| | D) | I, III, and IV only |
| | E) | I, II, III, and IV |
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9 | |
Which of the following is (are) true about a project that just breaks even on an accounting basis?I. The project has an internal rate of return that is equal to zero.
II. The project has an internal rate of return that is equal to 100 percent.
III. The project has a negative net present value.
IV. The project has a zero net present value.
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| | A) | I and III only |
| | B) | I and IV only |
| | C) | II and III only |
| | D) | II and IV only |
| | E) | IV only |
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10 | |
Which of the following is (are) true about a project that breaks even on a financial basis?I. The project has a zero internal rate of return.
II. The project has a negative net present value.
III. The project has a zero net present value.
IV. The project has an internal rate of return equal to the firm's required return.
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| | A) | I only |
| | B) | III only |
| | C) | II and IV only |
| | D) | I and III only |
| | E) | III and IV only |
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