What is an example of a variable cost

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Reference no: EM132555354

Question 1: Assume a project has cash flows of -$51,300, $18,200, $37,300, and $14,300 for years zero to three, respectively. What's the profitability index given a required return of 12½ percent?

A. .98

B. 1.09

C. 1.11

D. 1.06

Question 2: What's an example of a variable cost?

A. Cost of goods sold

B. Administrative costs

C. Rent

D. Depreciation

Question 3: A project will require $498,000 for fixed assets and $58,000 for net working capital. The fixed assets will be depreciated straight-line to a zero book value over the five-year life of the project. At the end of the project, the fixed assets will be worthless. The net working capital returns to its original level at the end of the project. The project is expected to generate annual sales of $875,000 and costs of $640,000. The tax rate is 35 percent, and the required rate of return is 15 percent. What's the amount of the annual operating cash flow?

A. $117,320

B. $147,820

C. $187,610

D. $105,000

Question 4: Net present value is based on many estimates and forecasts. What can be done to compensate for the uncertainty of these future variables?

A. Using IRR instead

B. Nothing

C. Decreasing the discount rate

D. Sensitivity and scenario analysis

Question 5: Assume a project has a sales quantity of 8,600 units plus or minus five percent and a sales price of $69 a unit plus or minus one percent. The expected variable cost per unit is $11 plus or minus three percent, and the expected fixed costs are $290,000 plus or minus two percent. The depreciation expense is $68,000. The tax rate is 34 percent. What's the operating cash flow under the best-case scenario?

A. $187,295.40

B. $175,705.93

C. $168,470.15

D. $164,208.11

Reference no: EM132555354

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