Exam 11: Project Analysis and Evaluation

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 ______________.

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

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

A combination of scenario and sensitivity analysis is called:

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

Provide a definition for the term operating leverage.

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

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%.

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?

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?

Conducting scenario analysis helps managers see the:

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

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:

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

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

Provide a definition for the term accounting break-even.

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?

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

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?

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