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41.
Given the following, which feature identifies the most desirable level of
output for a project?
42.
At the accounting break-even point, the:
43.
A project has a payback period that exactly equals the project's life. The
project is operating at:
44.
Valerie just completed analyzing a project. Her analysis indicates that the
project will have a 6-year life and require an initial cash outlay of $320,000.
Annual sales are estimated at $589,000 and the tax rate is 34 percent. The
net present value is a negative $320,000. Based on this analysis, the project
is expected to operate at the:
45.
A project has a projected IRR of negative 100 percent. Which one of the
following statements must also be true concerning this project?
46.
Which of the following characteristics relate to the cash break-even point
for a given project?
I. The project never pays back.
II. The IRR equals the required rate of return.
III. The NPV is negative and equal to the initial cash outlay.
IV. The operating cash flow is equal to the depreciation expense.
47.
When the operating cash flow of a project is equal to zero, the project is
operating at the:
48.
Which one of the following represents the level of output where a project
produces a rate of return just equal to its requirement?
49.
Which of the following statements are identified with financial break-even
point?
I. The present value of the cash inflows exactly offsets the initial cash
outflow.
II. The payback period is equal to the life of the project.
III. The NPV is zero.
IV. The discounted payback period equals the life of the project.
50.
You would like to know the minimum level of sales that is needed for a
project to be accepted based on its net present value. To determine that
sales level you should compute the:
51.
Theresa is analyzing a project that currently has a projected NPV of zero.
Which of the following changes that she is considering will help that project
produce a positive NPV instead? Consider each change independently.
I. increase the quantity sold
II. decrease the fixed leasing cost for equipment
III. decrease the labor hours needed to produce one unit
IV. increase the sales price
52.
You are considering a project that you believe is quite risky. To reduce any
potentially harmful results from accepting this project, you could:
53.
Which one of the following characteristics best describes a project that has
a low degree of operating leverage?
54.
Which one of the following will best reduce the risk of a project by lowering
the degree of operating leverage?
55.
The degree of operating leverage is equal to:
56.
Uptown Promotions has three divisions. As part of the planning process, the
CFO requested that each division submit its capital budgeting proposals for
next year. These proposals represent 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, respectively. For the
firm as a whole, the management of Uptown Promotions has limited
spending to $10 million for new projects next year. This is an example of:
57.
Brubaker & Goss has received requests for capital investment funds for
next year from each of its five divisions. All requests represent positive net
present value projects. All projects are independent. Senior management
has decided to allocate the available funds based on the profitability index
of each project since the company has insufficient funds to fulfill all of the
requests. Management is following a practice known as:
58.
The CFO of Edward's Food Distributors is continually receiving capital
funding requests from its division managers. These requests are seeking
funding for positive net present value projects. The CFO continues to deny
all funding requests due to the financial situation of the company.
Apparently, the company is:
59.
Precise Machinery is analyzing a proposed project. The company expects to
sell 2,300 units, give or take 5 percent. The expected variable cost per unit
is $260 and the expected fixed costs are $589,000. Cost estimates are
considered accurate within a plus or minus 4 percent range. The
depreciation expense is $129,000. The sales price is estimated at $750 per
unit, plus or minus 3 percent. What is the sales revenue under the worst
case scenario?
60.
Precise Machinery is analyzing a proposed project. The company expects to
sell 2,100 units, give or take 5 percent. The expected variable cost per unit
is $260 and the expected fixed costs are $589,000. Cost estimates are
considered accurate within a plus or minus 4 percent range. The
depreciation expense is $129,000. The sales price is estimated at $750 per
unit, give or take 2 percent. What is the contribution margin per unit under
the best case scenario?
