Q&A Hero

Q: For the period 19262016, the average risk premium on large-company stocks was about: A) 12.7 percent. B) 10.4 percent. C) 8.6 percent. D) 6.9 percent. E) 7.3 percent.

Q: The rate of return on which type of security is normally used as the risk-free rate of return? A) Long-term Treasury bonds B) Long-term corporate bonds C) Treasury bills D) Intermediate-term Treasury bonds E) Intermediate-term corporate bonds

Q: Which one of the following categories of securities had the lowest average risk premium for the period 19262016? A) Long-term government bonds B) Small-company stocks C) Large-company stocks D) Long-term corporate bonds E) U.S. Treasury bills

Q: Which one of the following categories of securities had the highest average annual return for the period 19262016? A) U.S. Treasury bills B) Large-company stocks C) Small-company stocks D) Long-term corporate bonds E) Long-term government bonds

Q: For the period 20092016, U.S. Treasury bills had an annual rate of return that was: A) between .5 and 1 percent. B) between 1 and 2 percent. C) negative in at least one year. D) negative for two or more years. E) between 0 and .25 percent.

Q: Which one of the following statements is a correct reflection of the U.S. financial markets for the period 19262016? A) U.S. Treasury bill returns never exceeded a return of 9 percent in any one year. B) U.S. Treasury bills had an annual return in excess of 10 percent in three or more years. C) Inflation equaled or exceeded the return on U.S. Treasury bills every year during the period. D) Long-term government bonds outperformed U.S. Treasury bills every year during the period. E) National deflation occurred in at least one year during every decade during the period.

Q: For the period 19262016, U.S. Treasury bills always: A) provided an annual rate of return that exceeded the annual inflation rate. B) had an annual rate of return in excess of 1.2 percent. C) provided a positive annual rate of return. D) earned a higher annual rate of return than long-term government bonds. E) had a greater variation in returns year-over-year than did long-term government bonds.

Q: Which one of the following time periods is associated with low rates of inflation? A) 19411942 B) 19731974 C) 20142015 D) 19791980 E) 19461947

Q: The historical record for the period 19262016 supports which one of the following statements? A) When large-company stocks have a negative return, they will have a negative return for at least two consecutive years. B) The return on U.S. Treasury bills exceeds the inflation rate by at least .5 percent each year. C) There was only one year during the period when double-digit inflation occurred. D) Small-company stocks have lost as much as 50 percent and gained as much as 100 percent in a single year. E) The inflation rate was positive each year throughout the period.

Q: Small-company stocks, as the term is used in the textbook, are best defined as the: A) 500 newest corporations in the U.S. B) companies whose stock trades OTC. C) smallest 20 percent of the companies listed on the NYSE. D) smallest 25 percent of the companies listed on NASDAQ. E) companies whose stock is listed on NASDAQ.

Q: Which of the following yields on a stock can be negative? A) Dividend yield B) Capital gains yield C) Capital gains yield and total return D) Dividend yield, capital gains yield, and total return E) Dividend yield and total return

Q: Which one of the following statements related to capital gains is correct? A) The capital gains yield includes only realized capital gains. B) An increase in an unrealized capital gain will increase the capital gains yield. C) The capital gains yield must be either positive or zero. D) The capital gains yield is expressed as a percentage of a security's total return. E) The capital gains yield represents the total return earned by an investor.

Q: Bayside Marina just announced it is decreasing its annual dividend from $1.48 per share to $1.45 per share effective immediately. If the dividend yield remains at its pre-announcement level, then you know the stock price: A) was unaffected by the announcement. B) increased proportionately with the dividend decrease. C) decreased proportionately with the dividend decrease. D) decreased by $.03 per share. E) increased by $.03 per share.

Q: Which one of the following correctly describes the dividend yield? A) Next year's annual dividend divided by today's stock price B) This year's annual dividend divided by today's stock price C) This year's annual dividend divided by next year's expected stock price D) Next year's annual dividend divided by this year's annual dividend E) The increase in next year's dividend over this year's dividend divided by this year's dividend

Q: Stacy purchased a stock last year and sold it today for $4 a share more than her purchase price. She received a total of $1.15 per share in dividends. Which one of the following statements is correct in relation to this investment? A) The dividend yield is expressed as a percentage of the par value. B) The capital gain would have been less had Stacy not received the dividends. C) The total dollar return per share is $2.85. D) The capital gains yield is positive. E) The dividend yield is greater than the capital gains yield.

Q: The president of Global Wholesalers would like to offer special sale prices to the firm's best customers under the following terms: 1. The prices will apply only to units purchased in excess of the quantity normally purchased by a customer. 2. The units purchased must be paid for in cash at the time of sale. 3. The total quantity sold under these terms cannot exceed the excess capacity of the firm. 4. The net profit of the firm should not be affected. 5. The prices will be in effect for one week only. Given these conditions, the special sale price should be set equal to the: A) average variable cost of materials only. B) average cost of all variable inputs. C) sensitivity value of the variable costs. D) marginal cost of materials only. E) marginal cost of all variable inputs.

Q: Steve, the sales manager for TL Products, wants to sponsor a one-week "Customer Appreciation Sale" where the firm offers to sell additional units of a product at the lowest price possible without negatively affecting the firm's profits. Which one of the following represents the price that should be charged for the additional units during this sale? A) Average variable cost B) Average total cost C) Average total revenue D) Marginal revenue E) Marginal cost

Q: Which of the following are inversely related to variable costs per unit? A) Sales quantity and sales price B) Net profit per unit and sales quantity C) Operating cash flow and sales quantity D) Operating cash flow per unit and contribution margin per unit E) Contribution margin per unit and marginal costs

Q: Which one of these combinations must increase the contribution margin? A) Increasing both the sales price and the variable cost per unit B) Increasing the sales quantity and increasing the variable cost per unit C) Decreasing the sales price and increasing the sales quantity D) Decreasing both fixed costs and depreciation expense E) Increasing the sales price and decreasing the variable cost per unit

Q: By definition, which one of the following must equal zero at the accounting break-even point? A) Net present value B) Depreciation C) Contribution margin D) Net income E) Operating cash flow

Q: The change in variable costs that occurs when production is increased by one unit is referred to as the: A) marginal cost. B) average cost. C) total cost. D) scenario cost. E) net cost.

Q: The change in revenue that occurs when one more unit of output is sold is referred to as: A) marginal revenue. B) average revenue. C) total revenue. D) erosion. E) scenario revenue.

Q: Fixed costs: A) change as a small quantity of output produced changes. B) are constant over the short-run regardless of the quantity of output produced. C) are defined as the change in total costs 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.

Q: Variable costs can be defined as the costs that: A) remain constant for all time periods. B) remain constant over the short run. C) vary directly with sales. D) are classified as noncash expenses. E) are inversely related to the number of units sold.

Q: Combining scenario analysis with sensitivity analysis can yield a crude form of ________ analysis. A) forecasting B) combined C) complex D) simulation E) break-even

Q: An analysis of the change in a project's NPV when a single variable is changed is called ________ analysis. A) forecasting B) scenario C) sensitivity D) simulation E) break-even

Q: Scenario analysis is defined as the: A) determination of the initial cash outlay required to implement a project. B) determination of changes in NPV estimates when what-if questions are posed. C) isolation of the effect that a single variable has on the NPV of a project. D) separation of a project's sunk costs from its opportunity costs. E) analysis of the effects that a project's terminal cash flows has on the project's NPV.

Q: Which one of the following types of analysis is the most complex to conduct? A) Scenario B) Break-even C) Sensitivity D) Degree of operating leverage E) Simulation

Q: Simulation analysis is based on assigning a ________ and analyzing the results. A) narrow range of values to a single variable B) narrow range of values to multiple variables simultaneously C) wide range of values to a single variable D) wide range of values to multiple variables simultaneously E) single value to each of the variables

Q: Which type of analysis identifies the variable, or variables, that are most critical to the success of a particular project? A) Scenario B) Simulation C) Break-even D) Sensitivity E) Cash flow

Q: A firm's managers realize they cannot monitor all aspects of their projects but do want to maintain a constant focus on the key aspect of each project in an attempt to maximize their firm's value. Given this specific desire, which type of analysis should they require for each project and why? A) Sensitivity analysis; to identify the key variable that affects a project's profitability B) Scenario analysis; to guarantee each project will be profitable C) Cash breakeven; to ensure the firm recoups its initial investment D) Accounting breakeven; to ensure each project earns its required rate of return E) Financial breakeven; to ensure each project has a positive NPV

Q: As the degree of sensitivity of a project to a single variable rises, the: A) less important the variable is to the final outcome of the project. B) less volatile the project's net present value is to that variable. C) greater is the importance of accurately predicting the value of that variable. D) greater is the sensitivity of the project to the other variable inputs. E) less volatile is the project's outcome.

Q: Assume you graph a project's net present value given various sales quantities. Which one of the following is correct regarding the resulting function? A) The steepness of the function relates to the project's degree of operating leverage. B) The steeper the function, the less sensitive the project is to changes in the sales quantity. C) The resulting function will be a hyperbole. D) The resulting function will include only positive values. E) The slope of the function measures the sensitivity of the net present value to a change in sales quantity.

Q: Sensitivity analysis determines the: A) range of possible outcomes given that most variables are reliable only within a stated range. B) degree to which the net present value reacts to changes in a single variable. C) net present value range that can be realized from a proposed project. D) degree to which a project relies on its initial costs. E) ideal ratio of variable costs to fixed costs for profit maximization.

Q: Which one of the following statements concerning scenario analysis is correct? A) The pessimistic case scenario determines the maximum loss, in current dollars, that a firm could possibly incur from a given project. B) Scenario analysis defines the entire range of results that could be realized from a proposed investment project. C) Scenario analysis determines which variable has the greatest impact on a project's final outcome. D) Scenario analysis helps managers analyze various outcomes that are possible given reasonable ranges for each of the assumptions. E) Management is guaranteed a positive outcome for a project when the worst-case scenario produces a positive NPV.

Q: When you assign the lowest anticipated sales price and the highest anticipated costs to a project, you are analyzing the project under the condition known as: A) best-case sensitivity analysis. B) worst-case sensitivity analysis. C) best-case scenario analysis. D) worst-case scenario analysis. E) base-case scenario analysis.

Q: Which of the following variables will be forecast at their highest expected level under a best-case scenario? A) Fixed costs and units value B) Variable costs and sales price C) Fixed costs and sales price D) Salvage value and units sold E) Initial cost and variable costs

Q: The base case values used in scenario analysis are the values considered to be the most: A) optimistic. B) desired by management. C) pessimistic. D) likely to create a positive net present value. E) likely to occur.

Q: Which one of the following will be used in the computation of the best-case analysis of a proposed project? A) Minimal number of units that are expected to be produced and sold B) The lowest expected salvage value that can be obtained for a project's fixed assets C) The most anticipated sales price per unit D) The lowest variable cost per unit that can reasonably be expected E) The highest level of fixed costs that is actually anticipated

Q: Scenario analysis is best suited to accomplishing which one of the following when analyzing a project? A) Determining how fixed costs affect NPV B) Estimating the residual value of fixed assets C) Identifying the potential range of reasonable outcomes D) Determining the minimal level of sales required to break-even on an accounting basis E) Determining the minimal level of sales required to break-even on a financial basis

Q: Steve is fairly cautious when analyzing a new project and thus he projects the most optimistic, the most realistic, and the most pessimistic outcome that can reasonably be expected. Which type of analysis is he using? A) Simulation testing B) Sensitivity analysis C) Break-even analysis D) Rationing analysis E) Scenario analysis

Q: The key means of defending against forecasting risk is to: A) rely primarily on the net present value method of analysis. B) increase the discount rate assigned to a project. C) shorten the life of a project. D) identify sources of value within a project. E) ignore any potential salvage value that might be realized.

Q: Forecasting risk is defined as the possibility that: A) some proposed projects will be rejected. B) some proposed projects will be temporarily delayed. C) incorrect decisions will be made due to erroneous cash flow projections. D) some projects will be mutually exclusive. E) tax rates could change over the life of a project.

Q: A proposed project has fixed costs of $42,106 per year. The operating cash flow at 12,000 units is $56,900. Ignore taxes. What will be the new degree of operating leverage if the number of units sold rises to 12,600? A) 1.46 B) 1.68 C) 1.57 D) 1.74 E) 1.82

Q: At an output level of 22,500 units, you calculate that the degree of operating leverage is 1.37. What will be the percentage change in operating cash flow if the new output level is 25,000 units? A) 17.78 percent B) 16.17 percent C) 15.22 percent D) 17.73 percent E) 15.08 percent

Q: A project has an estimated sales price of $71 per unit, variable costs of $44.03 per unit, fixed costs of $57,000, a required return of 14 percent, an initial investment of $79,500, no salvage value, and a life of four years. Ignore taxes. What is the degree of operating leverage at the financial break-even level of output? A) 2.72 B) 3.09 C) 2.53 D) 3.03 E) 1.48

Q: You are the manager of a project that has a degree of operating leverage of 1.84 and a required return of 15 percent. Due to the current state of the economy, you expect unit sales to decrease by 3.5 percent next year. What change should you expect in the operating cash flows next year given your sales prediction? A) 6.44 percent decrease B) 4.50 percent decrease C) 5.34 percent decrease D) 6.44 percent increase E) 5.34 percent increase

Q: Steele Insulators is analyzing a new type of insulation for interior walls. The initial fixed asset requirement is $1.62 million, which would be depreciated straight-line to zero over the 7-year life of the project. Projected fixed costs are $287,400 and the anticipated operating cash flow is $136,300. What is the degree of operating leverage for this project? A) 3.66 B) 1.92 C) 3.11 D) 2.27 E) 2.49

Q: The accounting manager of Gateway Inns has noted that every time the inn's average occupancy rate increases by 3.3 percent, the operating cash flow increases by 4.6 percent. What is the degree of operating leverage if the contribution margin per unit is $47? A) .72 B) .85 C) 1.75 D) 1.18 E) 1.39

Q: You are in charge of a project that has a degree of operating leverage of 1.06. What will happen to the operating cash flows if the number of units you sell increase by 3.7 percent? A) 3.49 percent decrease B) 4.76 percent decrease C) 3.70 percent decrease D) 3.69 percent increase E) 3.92 percent increase

Q: In an effort to capture the large jet market, Hiro Airplanes invested $11.264 billion developing its B490, which is capable of carrying 840 passengers. The plane has a list price of $276.5 million. In discussing the plane, Hiro Airplanes stated that the company would break even when 253 B490s were sold. Assume the break-even sales figure given is the cash flow break-even. Suppose the sales of the B490 last for only 12 years. How many airplanes must Hiro sell per year to provide its shareholders a rate of return of 17 percent on this investment? A) 50.17 B) 52.48 C) 50.72 D) 53.10 E) 54.40

Q: The Coffee Express has computed its fixed costs to be $.27 for every cup of coffee it sells given annual sales of 739,000 cups. The sales price is $.99 per cup while the variable cost per cup is $.12. How many cups of coffee must it sell to break even on a cash basis? A) 229,345 B) 146,472 C) 251,910 D) 167,630 E) 184,806

Q: Spencer Tools would like to offer a special product to its best customers. However, the firm wants to limit its maximum potential loss on this product to the firm's initial investment. The fixed costs are estimated at $27,400, the depreciation expense is $1,700, and the contribution margin per unit is $6.75. What is the minimum number of units the firm should pre-sell to ensure its potential loss does not exceed the desired level? A) 3,220 units B) 4,059 units C) 2,815 units D) 4,233 units E) 4,658 units

Q: Mountain Gear can manufacture mountain climbing shoes for $37.11 per pair in variable raw material costs and $15.09 per pair in variable labor costs. The shoes sell for $99 per pair. Last year, production was 248,000 pairs and fixed costs were $1.67 million. The maximum production level for the firm given its current assets is 275,000 pairs. What is the minimum acceptable total revenue the company should accept for a one-time order for an extra 12,000 pairs? A) $611,418 B) $987,600 C) $626,400 D) $947,700 E) $564,100

Q: Cool Shades manufactures biotech sunglasses. The variable materials cost is $1.38 per unit, and the variable labor cost is $.92 per unit. Suppose the firm incurs fixed costs of $348,000 during a year in which total production is 136,000 units and the selling price is $19.50 per unit. What is the cash break-even point? A) 16,453 units B) 22,435 units C) 20,233 units D) 18,907 units E) 14,768 units

Q: Tucker's Trucking is considering a project with a discounted payback period just equal to the project's life. The projections include a sales price of $39, variable costs per unit of $14, and fixed costs of $238,000. The operating cash flow is $24,300. What is the break-even quantity? A) 9,363 units B) 11,211 units C) 11,482 units D) 12,301 units E) 10,492 units

Q: You have determined that an OCF of $151,406 will result in a zero net present value for a project, which is the minimum requirement for project acceptance. The fixed costs are $387,200 and the contribution margin per unit is $56.11. The company feels that it can realistically capture 8.5 percent of the 140,000 unit market for this product. The tax rate is 21 percent and the required rate of return is 13 percent. Should the company develop the new product? Why or why not? A) Yes; The project's required rate of return exceeds the expected IRR. B) Yes; The expected level of sales exceeds the required level of production. C) No; The required level of production exceeds the expected level of sales. D) No; The contribution margin is too high. E) No; The OCF is too low.

Q: A project has a contribution margin per unit of $12.07, fixed costs of $67,840, depreciation of $14,310, variable costs per unit of $14.09, and a financial break-even point of 15,624 units. What is the operating cash flow at this level of output? A) $0 B) $122,500 C) $102,309 D) $120,742 E) $117,673

Q: A project has an accounting break-even quantity of 28,700 units, a cash break-even quantity of 17,120 units, a life of 10 years, fixed costs of $178,000, variable costs of $18.40 per unit, and a required return of 14 percent. Depreciation is straight-line to zero over the project life. Ignoring taxes, what is the financial break-even quantity? A) 39,723 units B) 39,201 units C) 39,458 units D) 39,624 units E) 39,320 units

Q: The Motor Works is considering an expansion project with estimated fixed costs of $127,000, depreciation of $16,900, variable costs per unit of $41.08, and an estimated sales price of $79.90 per unit. How many units must the firm sell to break even on a cash basis? A) 2,928 units B) 3,272 units C) 3,510 units D) 4,206 units E) 3,842 units

Q: A company is considering a project with a cash break-even point of 26,394 units. The selling price is $19 a unit, the variable cost per unit is $7, and depreciation is $89,800. What is the projected amount of fixed costs? A) $374,512 B) $316,728 C) $356,108 D) $288,512 E) $291,064

Q: A project has a unit price of $29.99, a variable cost per unit of $9.06, fixed costs of $487,020, and depreciation expense of $38,009. Ignore taxes. What is the accounting break-even quantity? A) 28,269 units B) 24,584 units C) 29,306 units D) 31,966 units E) 25,085 units

Q: A proposed project has fixed costs of $39,480, depreciation expense of $8,724, and a sales quantity of 1,330 units. The total variable costs are $5,607. What is the contribution margin per unit if the projected level of sales is the accounting break-even point? A) $37.81 B) $34.63 C) $36.24 D) $35.16 E) $38.13

Q: A project has an accounting break-even point of 7,264 units. The fixed costs are $164,800 and the projected variable cost per unit is $24.57. The project will require $398,000 for fixed assets which will be depreciated straight-line to zero over the project's four-year life. What is the projected sales price per unit? A) $56.59 B) $58.18 C) $64.02 D) $76.67 E) $60.95

Q: The accounting break-even production quantity for a project is 18,311 units. The fixed costs are $148,400 and the contribution margin per unit is $13.10. The fixed assets required for the project will be depreciated on straight-line basis to zero over the project's 4-year life. What is the amount of fixed assets required for this project? A) $535,592 B) $365,896 C) $448,500 D) $332,400 E) $429,600

Q: Wexford Industrial Supply is considering a new project with estimated depreciation of $38,200, fixed costs of $84,600, and total sales of $211,000 at the accounting break-even level. The variable costs per unit are estimated at $9.64. What is the accounting break-even level of production? A) 6,871 units B) 9,333 units C) 10,415 units D) 9,149 units E) 7,248 units

Q: The Metal Shop produces 1.7 million metal fasteners a year for industrial use. At this level of production, its total fixed costs are $486,000 and its total costs are $791,000. The firm can increase its production by 5 percent, without increasing either its total fixed costs or its variable costs per unit. A customer has made a one-time offer for an additional 50,000 units at a price per unit of $.165. Should the firm sell the additional units at the offered price? Why or why not? A) Yes; The offered price is less than the marginal cost. B) Yes; The offered price is equal to the marginal cost. C) No; The offered price is less than the marginal cost. D) Yes; The offered price is greater than the marginal cost. E) No; The offered price is greater than the marginal cost.

Q: At the accounting break-even point, Swiss Mountain Gear sells 22,940 ski masks at a price of $19 each. At this level of production, the depreciation is $67,000 and the variable cost per unit is $6. What is the amount of the fixed costs at this production level? A) $231,220 B) $259,400 C) $161,330 D) $187,660 E) $145,600

Q: At a production level of 5,280 units, a project has total costs of $150,000. The variable cost per unit is $23.12. Assume the firm can increase production by 750 units without increasing its fixed costs. What will the total costs be if 6,000 units are produced? A) $122,780 B) $124,640 C) $138,720 D) $122,074 E) $166,646

Q: Precise Machinery is analyzing a proposed project that is expected to sell 1,450 units, 3 percent. The expected variable cost per unit is $139 and the expected fixed costs are $123,000. Cost estimates are considered accurate within a 1 percent range. The depreciation expense is $39,000. The sales price is estimated at $349 per unit, 3 percent. What is the contribution margin per unit under the best-case scenario? A) $137.03 B) $194.33 C) $148.13 D) $187.42 E) $221.86

Q: A project has expected sales of 54,000 units, 5 percent, variable cost per unit of $87, 2 percent, fixed costs of $287,000, 1 percent, and a sales price per unit of $219, 2 percent. The depreciation expense is $47,000 and the tax rate is 23 percent. What is the contribution margin per unit for a sensitivity analysis using a variable cost per unit of $85? A) $132 B) $134 C) $135 D) $136 E) $133

Q: A suggested project requires initial fixed assets of $227,000, has a life of 4 years, and has no salvage value. Assume depreciation is straight-line to zero over the life of the project. Sales are projected at 31,000 units per year, the price per unit is $47, variable cost per unit is $23, and fixed costs are $842,900 per year. The tax rate is 23 percent and the required return is 11.5 percent. Suppose the projections given for price and quantity can vary by 4 percent while variable and fixed cost estimates are accurate to within 2 percent. What is the best-case NPV? A) $4,613 B) −$67,008 C) $127,511 D) $82,409 E) −$132,194

Q: Shoe Supply has decided to produce a new line of shoes that will have a selling price of $68 and a variable cost of $27 per pair. The company spent $187,000 for a marketing study that determined the company should sell 85,000 pairs of the new shoes each year for three years. The marketing study also determined that the company will lose sales of 24,000 pairs of its high-priced shoes that sell for $129 and have variable costs of $63 a pair. The company will also increase sales of its inexpensive shoes by 19,000 pairs. The inexpensive shoes sell for $39 and have variable costs of $15 per pair. The fixed costs each year will be $1.42 million. The company has also spent $1.29 million on research and development for the new shoes. The initial fixed asset requirement is $4.2 million and will be depreciated on a straight-line basis over the life of the project. The new shoes will also require an increase in net working capital of $447,000 that will be returned at the end of the project. Sales and cost projections have a 2 percent range. The tax rate is 21 percent, and the cost of capital is 12 percent. What is the NPV for the new line of shoes assuming the base-case scenario? A) −$1,844,788 B) −$806,318 C) $102,311 D) $687,415 E) $520,909

Q: You are considering a new product launch. The project will have an initial cost for fixed assets of $1,150,000, a three-year life, and no salvage value; depreciation is straight-line to zero. Sales are projected at 230 units per year, price per unit will be $7,500, variable cost per unit will be $3,900, and fixed costs will be $122,000 per year. The required return is 14.5 percent and the relevant tax rate is 24 percent. Based on your experience, you think the unit sales and price are accurate within a 2 percent range while costs may vary by 3 percent. What is the worst-case NPV? A) −$117,907 B) $156,446 C) −$78,517 D) $162,134 E) −$118,020

Q: Consider a 5-year project with an initial fixed asset investment of $324,000, straight-line depreciation to zero over the project's life, a zero salvage value, a selling price of $34, variable costs of $17, fixed costs of $189,700, a sales quantity of 94,000 units, and a tax rate of 21 percent. What is the sensitivity of OCF to changes in the sales price? A) $74,260 per $1 of sales B) $61,600 per $1 of sales C) $78,700 per $1 of sales D) $59,470 per $1 of sales E) $68,850 per $1 of sales

Q: A project has base-case earnings before interest and taxes of $36,408, fixed costs of $42,700, a selling price of $24 a unit, and a sales quantity of 22,000 units. All estimates are accurate within 2 percent. Depreciation is $16,700. What is the base-case variable cost per unit? A) $22.16 B) $23.84 C) $19.65 D) $22.23 E) $17.18

Q: Your company is reviewing a project with estimated labor costs of $14.68 per unit, estimated raw material costs of $43.18 a unit, and estimated fixed costs of $18,000 a month. Sales are projected at 15,500 units, 5 percent, over the one-year life of the project. Cost estimates are accurate within a range of 3 percent. What are the total variable costs for the best-case scenario? A) $869,925 B) $861,560 C) $913,421 D) $951,960 E) $891,960

Q: Stellar Plastics is analyzing a proposed project with annual depreciation of $28,750 and a tax rate of 23 percent. The company expects to sell 16,500 units, 3 percent. The expected variable cost per unit is $1.87, 1 percent, and the expected fixed costs are $24,900, 1 percent. The sales price is estimated at $7.99 a unit, 2 percent. What is the operating cash flow for a sensitivity analysis using total fixed costs of $26,000? A) $54,208 B) $64,347 C) $63,591 D) $62,408 E) $60,540

Q: Windows and More is reviewing a project with sales of 6,200 units, 2 percent, at a sales price of $29, 1 percent, per unit. The expected variable cost per unit is $11, 3 percent, and the expected fixed costs are $87,000, 1 percent. The depreciation expense is $68,000 and the tax rate is 21 percent. What is the net income under the worst-case scenario? A) −$38,578 B) −$39,713 C) $15,846 D) $28,704 E) $4,696

Q: Assume a project has a sales quantity of 7,400 units, 6 percent and a sales price of $59 a unit, 1 percent. The expected variable cost per unit is $13, 3 percent, and the expected fixed costs are $214,000, 2 percent. The depreciation expense is $63,000 and the tax rate is 23 percent. What is the operating cash flow under the best-case scenario? A) $136,759 B) $118,470 C) $145,705 D) $134,208 E) $124,220