1) Firm A has a Degree of Operating Leverage (DOL) of 2.0. Firm B has a DOL of 3.0. In comparing Firm A to Firm B, you would expect that Firm A would have ______ fixed costs relative to its total cost structure than Firm B and/but a ______ percentage change in operating cash flow resulting from changes in sea volumes than Firm B.

a) lower, smaller

B) higher, smaller

C) lower, larger

D) higher, larger

E) similar, less

2) which of the following statements is are true regarding flotation costs?

A) floatation costs decrease the NPV of a project

B) flotation costs are determined based on the target capital structure of the firm

C) a and b are correct

D) flotation costs are determined with respect to the specific capital type to be raised

E) flotation costs will increase the NPV of a project

3) a firms WACC is 12%. The firm is considering a project that is significNtly more risky than its current business model. Which statement is true regarding discount rate to use in analysizig this project?

A) the discount rate should be 12%

B) the discount rate should be <12%

C) the discount rate should be at least 36%

D) the discount rate should be > 12%

E) none is true