Company X and Y sell identical products at the same price, and with the same production 7) FINANCIAL LEVERAGE Company Y finances its operations with 100% equity. The economy goes into a recession, resulting in a significant sales & profit decline for both companies. Based on this information, we would expect that: a) Company X is generating lower returns for its shareholders than company Y, and has a higher stock beta. b) Company Y is generating lower returns for its shareholders than company X, and has a higher stock beta. c) Company X is generating lower returns for its shareholders than company Y, and has a lower stock beta. d) Company Y is generating lower returns for its shareholders than company X, and has a lower stock beta. Stock beta. d) Company Y is generating lower returns for its shareholders than company X, and has a lower stock beta. 8) WEIGHTED AVERAGE COST OF CAPITAL (WACC) Never-Crash Airline has a capital structure that consists of 30% debt and 70% equity. The company's cost of debt is 7%, and their cost of equity is 24%. Assuming no taxes, what is Never-Crash Airline's weighted average cost of capital (WACC)? a) 10.6% b) 15.5% c) 18.9% d) 37.8% Never-Crash Airline's weigh a) 10.6% b) 15.5% c) 18.9% d) 37.8% 9) BREAKEVEN POINT A firm sells a widget for $25 each. The unit variable cost is $10, and their fixed costs total $35,000. What is the breakeven point? a) 1,886 units b) 1,667 units c) 3,000 units d) 2,333 units 10) BREAKEVEN POINT Which of the following statements regarding a company's breakeven point is FALSE? a) The breakeven point (BEP) is the level of sales or production that a firm must achieve in order to fully cover all costs. b) A company at the breakeven point generates $0 earnings before interest and taxes (EBIT). c) A firm achieving its breakeven point is not generating a profit or a loss. d) Companies with higher fixed costs generally have breakeven points at a lower sales volume than companies with lower fixed costs