Objective type questions on leverage analysis

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Reference no: EM1314209

1. The point where a project produces a rate of return equal to the required return is known as the:

a. point of zero operating leverage.

b. internal break-even point.

c. accounting break-even point.

d. present value break-even point.

e. income break-even point.

2. The Adept Co. is analyzing a proposed project. The company expects to sell 2,500 units, give or take 10%. The expected variable cost per unit is $8 and the expected fixed costs are $12,500. Cost estimates are considered accurate within a plus or minus 5% range The depreciation expense is $4,000. The sale price is estimated at $16 a unit, give or take 2%. The company bases its sensitivity analysis on the expected case scenario. What is the sales revenue under the optimistic case scenario?

a. $40,000

b. $43,120

c. $44,000

d. $44,880

e. $48,400

Reference no: EM1314209

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