(TCO C) (CPA-04230) A company has total costs of $100,000, of which 40% is variable costs. What is the operating leverage?

ACCT 592 CPA Exam Preparation: Business Environment and Concepts Quiz 3 Answers


(TCO C) (CPA-04230) A company has total costs of $100,000, of which 40% is variable costs. What is the operating leverage?

(TCO C) ( CPA-03904) Datacomp Industries, which has no current debt, has a beta of .95 for its common stock. Management is considering a change in the capital structure to 30% debt and 70% equity. This change would increase the beta on the stock to 1.05, and the after-tax cost of debt will be 7.5%. The expected return on equity is 16%, and the risk-free rate is 6%. Should Datacomp's management proceed with the capital structure change?

(TCO C) (CPA-03753) The method that recognizes the time value of money by discounting the after-tax cash flows over the life of a project, using the company's minimum desired rate of return is the:

(TCO C) (CPA-03832) Willis, Inc. has a cost of capital of 15 percent and is considering the acquisition of a new machine, which costs $400,000 and has a useful life of five years. Willis projects that earnings and cash flow will increase as follows.

(TCO C) (CPA-03987) As a company becomes more conservative in its working capital policy, it would tend to have a (n):

(TCO C) (CPA-03558) An example of an indirect cash flow effect would be:

(TCO C) )CPA-03879) he principal measure of non-diversifiable risk included in the CAPM formula is the beta coefficient. The beta coefficient measures the volatility or risk inherent in an investment by:

(TCO C) (CPA-03840) The use of an accelerated method instead of the straight-line method of depreciation in computing the net present value of a project has the effect of:

(TCO C) (CPA-04104) A change in credit policy has caused an increase in sales, an increase in discounts taken, a decrease in the amount of bad debts, and a decrease in the investment in accounts receivable. Based upon this information, the company's:

(TCO C) (CPA-04247) The optimal imputed interest rate used in the residual income approach to performance evaluation can best be described as the: